Banking News Interest Rates Set To Remain At Record Lows 18470679

Interest rates set to remain at record lows
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Interest rates set to remain at record lows

08 April 2010 / by Rebecca Sargent

The base interest rate looks set to remain at 0.5 per cent for the 13th consecutive month today, as the Bank of England prepares to announce its decision.

Last week GDP growth was revised up to 0.4 per cent quarter-on-quarter in the fourth of 2009, and most evidence suggests that economic activity is picking up; causing experts to suggest that the MPC could probably give its April meeting a miss.

Commenting, Global Insight’s Howard Archer said: “There seems little, if any, reason for the members to adjust monetary policy and several good reasons for them to stay firmly in ‘wait and see mode’.”

In fact, Mr Archer predicts that interest rates will remain at 0.50% throughout 2010 as ongoing concerns over the recovery continue: “Furthermore, when interest rates finally do start to rise, the increases are likely to be gradual and limited because of the need to offset the marked tightening in fiscal policy that will start in 2011 at the latest,” he said.

Meanwhile the Bank of England is not expected to engage in further quantitative easing “unless the economy suffers a major relapse over the coming months” but it is not expected to reverse it until 2011.

Nevertheless, an air of caution remains among experts, as the British Chambers of Commerce (BCC) made it clear that a double-dip recession is still a possibility. Commenting, David Kern, chief economist at the BCC said:

“Given the dangers still facing the economy, policy must remain expansionary. Any consideration of raising interest rates and withdrawing the QE stimulus must be postponed until there is more conclusive evidence that growth is secure.”

© Fair Investment Company Ltd

Written by Editorial Team