Base rate held at 0.5%
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The Bank of England’s Monetary Policy Committee has voted to keep base rate at 0.5% this month, marking the one-year anniversary of record low interest rates.
The MPC has also decided not to extend its quantitative easing programme beyond the £200bn it has already spent on buying up assets to boost the economy.
Minutes published by the Committee last month show that the Bank may look to spend more on quantitative easing in the future, but wants to judge how effective its purchases have been before it commits more money to the programme.
Figures from the Office for National Statistics last week revealed that the UK economy had grown between October and December by more than was originally thought.
UK gross domestic product grew by 0.3% in Q4 according to the latest revision, up from the sluggish 0.1% growth initially estimated by the ONS.
The quantitative easing programme was not expected to be boosted further this month as the Bank looks to curb rising inflation.
Inflation hit 3.5% in January, the highest level since November 2008 and up from 2.9% in December.
Ben Thompson, director of mortgages at Legal & General, says: “Political forces will significantly influence the overall economic picture this year - we’ve got an election coming up and inevitable tax hikes to tackle the gargantuan government debt.
“This will hit the pockets of British families, tempering their spending and allowing the MPC to maintain rates at a low level for some time yet.”
He adds: “The lurking threat is inflation though.
“The Bank expects inflation to remain high for several months but only temporarily so.
“There are some signs that inflationary pressure may build up over the course of this year and next year.”
Ray Boulger, senior technical manager at John Charcol, says: “The economic arguments continue to suggest a tracker mortgage is the right choice for most borrowers because the economy is in such a mess that low interest rates are here for some time yet.
“Yet the election cannot be ignored.
“The markets have been expecting a Conservative majority and what once looked like a forgone conclusion is now not so certain.
“This may have a negative effect on fixed rate pricing.”
Readers' comments (3)
William Kingsley | 4 Mar 2010 12:20 pm
This result was to be expected as there are too many things depressing spending. Any inflationary pressures are not being caused by everyone spending too much, it is due to increased fuel costs and Govt tinkering with VAT. Only the weak pound can send rates up this year.
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Connor M | 4 Mar 2010 12:20 pm
Well, I thought I'd saved a few starving Ethiopians in the 80's when I gave to Live Aid. Turns out 95% of my money bought arms from the Soviets for local militias. Now my savings capital and interest are supposedly being used to bail out lots of "worthy" "hard working" mortgagees. In twenty years time I fully expect to be told my savings paid bankers bonuses and propped up fraudulent self-certers. Hay-ho. And they call it a free market. What a joke.
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Anonymous | 4 Mar 2010 7:44 pm
Politicians have been lining up their pockets for years. Details of some senior cabinet ministers' expense claims show how this was done.Others profited from property and other deals.Then they bailed out the banks at our expense to line up their jobs when they are given their P45 by the electorate.We are going to be further penalised by these incompetent people through cuts in public expenditure and increased taxes.I wonder if their domestic finances are in a similar state and if they would be happy to see their future generation pay off their debts. Somehow I think they have already made us pay for it.
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