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Rates held at record 0.5% low

By John-Paul Ford Rojas

Published 12/05/2015

Report: Bank boss Mark Carney
Report: Bank boss Mark Carney

Interest rates have been kept at their historic low of 0.5% as the Bank of England announced the result of deliberations concluded on Friday.

Rates have been at their current level for six years, with the recent slide in inflation to zero pushing back expectations for the timing of a hike into 2016.

The Bank's monetary policy committee (MPC) announced its decision yesterday.

Greater insight into the Bank's thinking will emerge tomorrow with its quarterly inflation report and second letter from governor Mark Carney to the Chancellor explaining why inflation is more than 1% off its 2% target.

Both report and letter will be scrutinised for clues on the path for interest rates after minutes of the MPC's latest rates meeting appeared to indicate that inflation might recover more quickly than previously expected.

Consumer Price Index (CPI) inflation was at zero in February and March - rather than turning negative as some expected - meaning it might now have avoided this risk. The Bank has said it expects CPI, which has been under pressure amid the sliding cost of oil and the supermarket price war, to turn negative "at some point in the coming months".

But members have noted that another cause of low inflation - a strong pound making imports cheaper - might have been feeding through to CPI more quickly than expected, meaning a bounce-back could also come sooner.

Belfast Telegraph

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