The Bank of England presses pause on interest rates again

Today, the Bank of England voted to keep interest rates at 5.25 per cent whilst suggesting that monetary police will remain restrictive.

The news is bitter sweet to the business community as they look ahead to a rocky future for the nations economy.

Discussing the news from the Bank of England, Susannah Streeter, head of money and markets at Hargreaves Lansdown said:“The Bank of England is singing the same tune as the Federal Reserve and has stayed firmly in the ‘wait and see’ chorus, cautious that the full impact of interest rates hikes has yet to be felt.

“The decision to press pause, and hold rates at 5.25 per cent, was widely expected, so caused no major market movements initially. The FTSE 100 has remained deep in positive territory, while the pound shifted slightly higher against the dollar, building on gains made since yesterday, though sterling is still largely hovering around lows not seen since March.

“Although this wasn’t a unanimous vote, there is a growing strength of feeling that previous rate hikes need more time to feed through. There are deepening concerns about the faltering economy as the high borrowing costs batter financial resilience and policymakers paint a stark picture of a stagnation scenario lasting until 2025.”

Richard Berry, founder of goodmoneyguide.com, comments: “Today the main event is the sideshow. The Monetary Policy Committee’s decision to hold interest rates steady surprised almost no-one, even if the voting record shows the decision was much closer than expected.

“Its forecasts make for grim reading. Zero economic growth in the third quarter and a downwardly revised prediction of 0.1% growth in the final three months of the year.

“For savers though there was some solace – the Bank’s updated projections showed the Base Rate could stay at its current level for as much as a year. Fears that the current crop of high-interest savings accounts might soon disappear have should now ease.”

Nicholas Hyett, Investment Manager at Wealth Club, commented; “The market had expected the Bank of England to hold rates steady this time round, so there’s no headline surprise from the Monetary Policy Committee.

“The Bank seems to disagree with the widely held view that the UK economy is creaking badly. While it notes some gloomy data from the most recent PMIs and evidence that labour markets are softening, it does not think the UK is on the edge of a dangerous economic reverse. In fact, three members of the committee voted to raise rates further – clearly suggesting the Bank sees more risk in inflation than in recession.

On a more positive note, Hyett added, “Having said that there is some good news where inflation is concerned. Inflation is expected to be under 5 per cent in the final quarter of the year. A substantial fall from the most recently reported number and welcome news for a government that made cutting inflation a key policy pledge.”

By Mark Adair – Correspondent, Bdaily

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