Member Article

Interest rates held at 0.5%

The Bank of England’s Monetary Policy Committee (MPC) has kept UK interest rates on hold at 0.5%, and unveiled no new quantitative easing (QE) measures.

Policymakers have been under pressure to consider raising rates from historic lows in a bid to rein back inflation.

However, data showing a surprise 0.5% contraction in UK GDP during the last three months of 2010 appeared to make an imminent rate rise less likely amid fears it would stifle recovery.

Ian McCafferty, CBI Chief Economic Adviser, said: “This announcement to keep rates the same is not a surprise, but with more MPC members showing their concerns about inflationary pressures, the Bank is in the process of shifting its stance.

“Looking beyond the recent surprising GDP data, the CBI still predicts growth in 2011, albeit modest, but recent indicators suggest that the inflation outlook has worsened.”

The latest official inflation data showed that Consumer Prices Index (CPI) inflation rose to 3.7% in December, well above the target rate of 2%, led by price rises in food and fuel.

Many economists are expecting rates to rise soon, with May being seen as the likely month for movement.

This was posted in Bdaily's Members' News section by Ruth Mitchell .