The Bank of England (BoE) base rate has been set at 0.5% since March 2009, 25 consecutive months, and at the last Monetary Policy Committee (MPC) meeting held on 7th April 2011, 6 out of the 9 member group voted to maintain this rate. 

So how much longer will this rate be maintained at its historical low?

The latest figures released reviewing the state of the UK economy have shown growth for the first quarter of 2011 of 0.5% following a contraction of 0.5% for the last three months of 2010. This effectively means that growth has been stagnant over the past 6 months.

That said, at least a return to positive growth will ally fears of a double-dip recession but in the short-medium term it does still demonstrate how fragile the economy is. This is likely to prey hard on the MPC when they next meet in May as many leading economists had forecast growth of 0.8% for the first quarter of 2011. 

Back in February when the Consumer Price Index (CPI) for Inflation was reported at 4.4% (2.4% above the Government target mandated to the BoE) it was predicted by many economists that the BoE would have no choice but to start increasing interest rates from May this year in order to curb rising inflation; indeed the Governor of the BoE, Meryvn King, even hinted at this in a press conference. Any predictions of a rate rise are feared by many mortgage borrowers who are currently enjoying the low rate of borrowing. 

However, following a fall in CPI to 4.0% in March and the recently published growth figures for the economy, many now believe that interest rates will remain untouched until at least August or even later in the year. It would appear that the Government’s austerity measures are starting to affect inflation and with growth 37% below expectations the MPC are probably unlikely to exacerbate the situation with an immediate rate rise. 

This is obviously not good news for savers who have now suffered over 3 years or more of low interest rates and reduced income.

To ensure that you are maximising your opportunities you should review your current and future income levels on a regular basis? Please don’t hesitate to contact us on 0845 345 3536 for further information on how we can help.