No change on cards for rest of year as MPC holds base rate once more

Interest rates look increasingly likely to remain on hold for the rest of the year, following the Monetary Policy Committee’s decision to freeze them at 0.5% last week for the 37th consecutive month.

It also voted to maintain the size of its asset purchase programme.

MPC members were split 7-2 on whether to increase the quantitative easing programme last month, with two members wanting to boost it by £25bn to £350bn.

Chris Parrish, group treasurer at Yorkshire Building Society, says: “UK and worldwide economies remain relatively fragile and recent data from the Organisation for Economic Co-operation and Development suggested the UK economy shrank by 0.1% in Q1, tipping us back into recession.”

He says most economic commentators concur that the base rate is unlikely to rise this year.

But Barry Naisbitt, chief economist at Santander UK, says that although gross domestic product declined by 0.3% in Q4 2011, recent indicators of economic activity have revealed more positive readings.

He adds: “Given last month’s split vote on QE and recent speeches by MPC members, people will be interested in the minutes of this month’s meeting to see if anyone voted to extend QE.”