Interest rates to stay at 0.5 per cent in June
Interest rates in the UK will remain on hold at 0.5 per cent for another month, the Bank of England has said.
Its decision to hold the ultra-low rate for a 27th month comes after renewed fears over fragility in the UK economy, while concerns over growing inflation have subsided.
The decision to hold rates in June was widely expected following muted GDP figures and a range of data suggesting UK consumer confidence and companies’ purchasing manager indices are low.
The news will protect UK mortgage and debt holders but prevent savers from benefiting from higher interest rates on deposits.
“The concern is of course inflation, which has risen to 4.5 per cent. However, given the existing sluggishness of domestic demand, it is difficult to see how higher interest rates will help bring the rate of inflation down,” said Chris Williamson, chief economist of research organisation Markit.
He said inflation was generated largely by influences beyond the Bank’s control such as commodity prices, but there were signs that prices of oil and metals were now falling.
“The financial markets are not pricing in a rate hike until May of next year which – given the recent flow of data – seems a reasonable estimate of when the economy may be able to withstand a tightening of policy,” he said.