The Bank of England’s Monetary Policy Committee has once again voted to keep the current base interest rate at its historic low of 0.5 per cent.
Many business bank account groups have welcomed the news. British Cambers of Commerce chief economist, David Kern, remarked that the MPC’s decision will contribute to businesses being able to better weather the difficult trading conditions brought about by the credit crunch and resultant global economic downturn.
Mr Kern added that interest rates need to be kept at their current low levels until later in the year, when the economic recovery becomes more secure. Increasing the base rate prematurely could have a deleterious affect on jobs and growth across many sectors, remarked the chief economist, with the services sector being affected the most seriously.
The MPC has come under fire from several different sources for their repeated decisions to preserve the low base rate. As the country’s inflation rate has grown to 4 per cent, two times the target rate set by the Government, many financial experts have become concerned about the erosion of funds deposited in savings accounts that have interest rates that don’t meet or exceed inflation.
One full third of MPC policymakers voted last February to raise the base rate. The remaining six members voted against the rate hike.
Ian McCafferty, the Confederation of British Industry’s chief economic adviser, stated that the decision on the part of the MPC to preserve the low rate is not surprising. He did note that pressures to do so because of inflation are on the rise.
McCafferty commented that the issue continues to be clouded by short-term data, despite the growing risk of inflation becoming harder to combat as wage earners seek higher-paying positions and firms look to boost their profit margins in the face of sharp increases to commodities and energy.