No change for interest rates
Despite speculation that we might see a rise this month, the Bank of England’s Monetary Policy Committee (MPC) have chosen to keep interest rates at 0.5%. In February three members of the rate setting committee voted for a rise, but it seems that there are is still a clear divergence in views amongst the 9 man group.
With inflation currently sitting at twice the Bank’s target rate of 2%, the Bank face the dilemma that raising interest rates may help keep inflation in check but at the risk of increasing the cost of borrowing and tipping the UK back into recession.
The group also chose not to announce any additional quantitive easing measures.
We will have to wait until March 23rd when the minutes of today’s meeting are published to find out whether the momentum across the committee is swinging towards a rate rise. The next meeting of the MPC is on 7th April 2011.
The markets have already priced a quarter percentage point rate hike in May as likely, with two more predicted by the end of the year. Longer range interest rate forecasters think an interest rate range of 2.25%-2.50% by the end of 2012 and possibly 3.0% by December 2013. Only time will tell if these forecasts turn out to be fact or fiction.