The Monetary Policy Committee for the BoE is more than likely going to maintain the currently historically low interest rate of 0.5 per cent it initially instituted 19 months ago, industry experts say.
While those same experts have also commented that the MPC will most likely persist in holding the interest rate at its current level until the beginning of next year, there is an expectation amongst economists that the entire nine member Committee will be continuing to keep the government’s quantitative easing programme in a holding pattern.
The one holdout amongst the MPC’s members has been Mr Andrew Sentance, who has been voting for the last quarter to increase interest rates due to concerns in regards to kerbing inflation, currently above the government’s 2 per cent target. Runaway inflation can be dangerous, economists say, due to the devaluation of the pound, especially for consumers with savings accounts.
IHS Global Insight economist Howard Archer recently told Reuters in an interview that there are suspicions that the remaining committee members will decide that rates will stay the same, concluding that the need to encourage economic recovery has priority over any concerns regarding inflation.
The Consumer Price Index as it stands now has been holding steady at 3.1 per cent. It has has been above target for the past eight months, and while the CPI is used as a benchmark for the Committee, BoE Governor Mervyn King has been dismissive of the need to hike interest rates in order to combat inflation.
This past August, however, think tank the Policy Exchange cautioned that there may be increases to interest rates of up to 8 per cent over the next two years in order to do exactly that.
Dr Andrew Lilico, chief economist for the influential think tank, has stated that the UK faces the possibility of experiencing a double-dip economic downturn, though it would be followed closely by an economic boom, which would be facilitated by rampant monetary growth.