Rates held at emergency low of 0.5pc for two years

INTEREST rates have been kept down at their historic low for two years, after the Bank of England voted to keep rates at 0.5 per cent yesterday.

With British inflation predicted to have moved above four per cent in February, and the European Central Bank suggesting it is on the verge of a rate hike for the euro, there is pressure on the Bank of England to begin monetary tightening in the UK.

“There are growing risks of inflation becoming more ingrained as firms attempt to bolster their profit margins and employees seek higher wage rises,” said John Cridland, head of the Confederation of British Industry.

“The shifting pattern of Bank voting suggests that these risks are an increasing concern,” Cridland said.

On 23 March the Bank will reveal if more members of the committee joined the three hawks who voted for a rate rise in February.

Analysts have suggested that the Bank is most likely to vote for a rate hike in May, once official GDP data for the first three months of the year shows a return to growth. A snow-affected fourth quarter of 2010 resulted in a 0.6 per cent contraction in the economy. ECONOMICS: P13