Bank Of England Keeps Interest Rates At 0.5% Again

The Bank of England has decided to keep the base rate unchanged at 0.5% for the 19th month in a row.

The Monetary Policy Committee (MPC) which meets to decide on the base rate each month opted to keep rates at the record low of 0.5% again today.

This decision was anticipated by economists, although one of the MPC members has been arguing for a rate rise to combat inflation, for the last four months.

It appears that other members of the committee, who voted in favour for holding the base rate at0.5% see the threat of inflation fading in future months as the economy slows down when Government cuts and tax rises take effect.

House price rises are already slowing down as consumer confidence has been dented by the prospect of the forthcoming VAT rise and uncertain job prospects.

Maintaining the rate at 0.5% today does mean that this has now been the longest period of rate stability since the Second World War.

There are lessons to be learnt from the pre war years, and decisions made during the Great Depression, says Ray Boulger of independent mortgage adviser John Charcol:

“The authorities can draw on the lessons of the 1930s and have more tools at their disposal now and so there are reasonable grounds to expect the current period of austerity will be shorter. However, as highlighted this week by the Council of Mortgage Lenders, there is a real danger that policy mistakes such as over exuberant mortgage regulation in response to past regulatory failure will drag the economy down further and hence delay the recovery.”

“This all adds support to our view that Bank Rate will remain low for a long time and when it does start to rise the increases will be slow.”