The Bank of England’s monetary policy committee (MPC) has unanimously decided not to increase interest rates in the face of subdued global growth and market falls.
The decision – which saw the one remaining MPC policymaker previously calling for a rate hike abandon this position – came as the bank warned that global growth had fallen back further in the past three months.
The decision to hold the base rate at 0.5 per cent came after BoE Governor Mark Carney last month said he was postponing an increase in interest rates, sending the pound’s value against the dollar tumbling.
Mr Carney, who had predicted several months ago that an increase in interest rates would come into “sharper relief” at the beginning of this year, said the time was no longer right to raise the base rate.
Speaking in the Peston Lecture at Queen Mary University of London last month, he said the UK’s economy was being affected by a “powerful set of forces”.
Ruth Miller, UK economist at research company Capital Economics said: “Given that the MPC has not sent any signals that it is even thinking about preparing the ground for a rate rise, the chance of a rate hike in the first half of this year looks slim – our previous forecast was for a rise in May.
“None the less, we still think that markets have gone too far in not expecting a rate rise until 2018. We still think that a rate rise this year is likely, and now expect the MPC to hike in November 2016.”
Adviser View
Jeremy Duncombe, director of Legal & General Mortgage Club, said the MPC’s decision to hold interest rates at 0.5 per cent is good news for anyone looking to secure a mortgage, as there are a number of good deals available at the moment.
He said: “The mortgage market is extremely competitive at present, with many lenders thinning their profit margins to offer lower rates.”
