UK Interest Rates Kept at a Record Low

Once again the Bank of England have held interest rates at 0.5%. The size of its bond-buying stimulus programme has also remained unchanged at £375bn.

The decision comes more than six years since the record low interest rates were introduced by the Bank’s Monetary Policy Committee.

The six years of extra-low interest rates have led to returns from savings being reduced, however, those who have taken out mortgages have benefited from lower repayments.

Expectations of the Bank of England raising interest rates in 2015 have been scuppered due to inflation turning negative at -0.1% in April.

The Bank’s quarterly inflation report, which was released last month, indicated that it was set to increase the cost of borrowing in the middle of next year.

In addition to this, the recent ONS figures confirmed that the UK gross domestic product (GPD) slowed to 0.3% in the first quarter of the year, its worst performance since the end of 2012.

Howard Archer, chief economist at HIS Global Insight, remarked: “The Bank of England was always a nailed-on certainty to keep interest rates at 0.5%. Indeed, the odds currently strongly favour the Bank of England sitting tight on interest rates over the rest of 2015.

He added: “We expect the Bank of England to start edging interest rates up in the first half of 2016.”

The British Chambers of Commerce have also stated that the Monetary Policy Committee had made the “right decision” to keep interest rates and quantitative easing on hold.

source: http://www.bbc.co.uk/news/business-33003037