Interest Rates stay at 0.5% !!!!

The Bank of England has held rates at 0.5pc for the 25th month in a row.

The decision was widely expected but follows a swing within the rate-setting Monetary Policy Committee (MPC) towards a rate hike last month.

Economists and the markets predict the first rate rise to come in May, of 0.25 percentage points, bringing an end to the longest unchanged period since 1950. In the February meeting, three members of the MPC voted for an increase, with Andrew Sentance calling for a half point rise to 1pc.

There are currently four different opinions within the nine-strong committee, a far larger degree of disagreement than usual that reflects one of the most difficult decision making periods in memory.

One member, Adam Posen, is calling for an extra £50bn of quantitative easing to offset the economic squeeze being imposed by the looming cuts. Two members, Martin Weale and the Bank’s chief economist Spencer Dale, want rates to rise by a quarter point. Mr Sentance wants a half point rise, and the remaining five members are in favour of the status quo.

The minutes of Thursday’s meeting, published in two weeks' time, will reveal if there has been any change in voting patterns.

Mervyn King, Governor of the Bank of England, earlier this month conceded that the Bank would hit its inflation target of 2pc if it moved with what were then market expectations of two rate rises by the end of the year. Inflation is currently double the target rate of 4pc, piling pressure on the committee to raise rates into the teeth of the austerity cuts.

However, he stressed that the Bank would react to circumstances and that rate rises are not a forgone conclusion.
Economists and business groups have warned that the recovery could slow more sharply than expected once the cuts start to be felt and that the Bank should stay its hand until it’s clear there is sufficient resilience to withstand both the austerity measures and rate rises.
The Bank also left unchanged the £200bn of quantitative easing.