Connect with us

Hi, what are you looking for?

NewsTimes.co.ukNewsTimes.co.uk

UK NEWS

UK interest rates still at record low

UK interest rates have been held at 0.5% again by the Bank of England’s Monetary Policy Committee.

MPC members voted 8-1 to keep rates on hold, with only Ian McCafferty voting to raise rates.

The decision marks the 78th consecutive month of record-low interest rates. In its report, it said the outlook for inflation was “muted”.

Some economists say a rate rise could now be put off, although governor Mark Carney said it was “drawing closer”.

“Those analysts who predicted a rate rise this year may be on brink of having to rip up their predictions,” said Aberdeen Asset Management chief economist Lucy O’Carroll.

Many analysts had anticipated that two or three policymakers would vote for a rate increase.

But a collapsing stock market in China and continuing talks over Greece’s debts mean the outlook for global growth is muted.

Energy prices fall

The central bank said it expected inflation to be back to its 2% target in two years’ time.

Advertisement. Scroll to continue reading.

Standing in the way of the Bank’s desire for higher inflation is a drop in oil prices and energy costs in general, as well as a rise in the value of sterling, which the Bank estimates has risen 3.5% since May.

The timing for a Bank rate increase is “drawing closer”, Mr Carney said in a news conference, but cannot “be predicted in advance”. The decision would be determined by looking at economic data, he added, including wage growth, productivity and import figures.

The increases, when they came, would be “gradual” and limited to a level “below past averages”, he said, which is in line with his previous forecasts of how rates will change.

Economy ‘in need of care’

This Thursday marks the first time the Bank has released the monthly rate decision at the same time as the minutes of the Bank’s Monetary Policy Committee meeting, without the hitherto normal fortnightly gap, and has been named by pundits as Super Thursday.

“It would have been imprudent to push through a rate rise at this moment when our economic recovery remains in need of care and encouragement,” said John Longworth, director general of the British Chambers of Commerce.

“Rates will eventually have to rise and when they do, it should be done slowly and steadily. Until that moment, the Bank of England is right to keep interest rates at current levels.”

The 8-1 decision follows months of unanimous decisions to keep rates where they are.

The UK’s bond-buying programme is also frozen at £375bn.

The pound fell 0.6% against the dollar to $1.5509 and the euro rose 0.7% to 70.38 pence.

Advertisement. Scroll to continue reading.
line

Analysis: Robert Peston, BBC economics editor

There is what to many will look like a contradiction at the heart of the Bank of England’s voluminous pronouncements on inflation and interest rates.

On the one hand, it expects price changes to be zero or even negative – or well below the 2% target – for longer than it predicted back in May (and actually nought over the next couple of months).

But the Bank also expects inflation to return to target on the basis of interest rates that could rise a bit faster next year than it had been anticipating.

That said, don’t panic if you have a mortgage – the Bank’s forecasts are based on the assumption that the interest rate it controls, Bank Rate, will rise just 0.25% in the first four months of next year and could double from 0.5% to 1% by the end of 2016.

So if banks and building societies simply pass on this increase in their borrowing costs to customers, mortgage rates would rise by 0.5% next year.

Source: https://www.bbc.com

You May Also Like

UK NEWS

Professing to be the lead in Thai relationship with over 1.5 million enrolled single people, Cupid Media’s ThaiCupid brings the one in every of...

WORLD NEWS

An exclusive article form Orestis Karipis In the 1930’s and 1940’s acid was the weapon of deceived husbands and wives in the Western world...

UK NEWS

Read more about switzerland women here. Swiss ladies and men are not reknown for being the most chatty, outgoing or spontaneous when meeting strangers...

FOOD TIPS

In food, if there is one thing you can say without fear of contradiction, it is this: Britain loves burgers. The UK market is...

Copyright © 2020 NewsTimes.co.uk All Rights Reserved