BoE holds base rate at 0.5pc for yet another month

The Monetary Policy Committee of the Bank of England has yet again decided to maintain interest rates in the UK in their holding pattern with a base rate of 0.5 per cent.

The MPC originally set the low base rate in March of 2009 in an effort to boost economic recovery.  The low rate has led to small business bank accounts benefiting from relatively low repayments on their business loans but critics say that the low base rate does little to offset rampant inflation in the UK.

Official statistics demonstrated that the economy underwent a contraction in the fourth quarter of last year. This has led industry analysts to interpret the MPC’s reluctance to increase rates in an effort to not add to the growing inertia in economic recovery for the country.

Despite this, the fact remains that inflation has been running more than 2 percentage points over and above the government’s target rate of 2 per cent.  Even though the current inflation rate is 4.4 per cent, the BoE has stated that inflation will decline to the target rate by 2012.

On a global economic scale inflation, has recently been an issue.  Many central banks worldwide have either lifted their rates or are currently considering the move in an effort to reduce inflationary pressures.

The MPC has not been immune to such debate.  Policymaker Andrew Sentance has been voting for an increase in rates since last June in an effort to curb inflation.  Fellow committee members Spencer Dale and Martin Weale have additionally voted for base rate increases in the past two meetings.

In related news, the BoE’s decision to maintain rates is contrasted by expectation that the European Central Bank will soon announce that it will be raising its own rates.  The Euro zone bank’s current rate of 1 per cent will most likely be increasing, though industry experts are unsure of how much.

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