Base interest rate unlikely to rise this year, research says

According to recent research findings, the Bank of England’s base interest rate is unlikely to rise before the end of 2011, spelling good news for those seeking business loans whilst dooming savers to sub-par investment opportunities.

The latest Reuters economist poll found that the BoE’s Monetary Policy Committee had a 70 per cent chance of leaving the base rate at its current record low of 0.5 per cent.  The MPC has persistently voted against raising the base rate for more than two years straight, which has done little to curb inflation and its degrading effects upon balances in personal and business bank accounts.

Economists did predict that the base rate will be raised within the first three months of 2012, however.  Other industry experts were more conservative in their estimates, predicting a full 12 months or even longer before rates were increased.

The response to the news was mixed at best.  UK consumers paying off large variable-rate mortgages benefit from the increased low base rate, which means their monthly repayments are more modest, yet savers have been bemoaning the erosion of their savings accounts due to inflation that currently meets or exceeds the interest rates on nearly every savings offering on the market currently.

On each side of the coin are individuals and households that are hard pressed to cope with the currently bleak economic landscape.  Finances are overstretched everywhere, and while an interest rate hike would put more money in the pockets of savers and pensioners, it would take more from those Brits paying back large mortgages.

Meanwhile the cost of living in the UK continues to grow by leaps and bound.  Everyday items such as petrol and food are growing more expensive due to inflation, and industry experts predict no end to inflationary growth without an increase to the base rate.

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