Belfast Telegraph

UK Website Of The Year

Home News UK

Bank of England looks set to keep interest rates on hold

Published 17/03/2016

Some experts predict the Bank of England might cut rates as it looks for new ways to revive the UK economy
Some experts predict the Bank of England might cut rates as it looks for new ways to revive the UK economy

The Bank of England looks set to mark seven years of record low interest rates by keeping borrowing costs on hold once again amid global growth fears and the looming EU referendum.

Policymakers on the Bank's Monetary Policy Committee (MPC) will reveal their latest decision on interest rates at noon amid expectations for a unanimous vote in favour of leaving interest rates at 0.5%, where they have remained since March 2009.

It would be a repeat performance of last month when sole dissenter Ian McCafferty changed his position from raising rates to 0.75% to keeping them on hold.

Experts are predicting rates will stay at 0.5% until 2017.

But darkening skies over the global economy, the oil price rout and turbulence in the markets have led some experts to predict that the Bank might cut rates over the coming months as it looks for new ways to revive the UK economy.

Closely watched surveys from the services, manufacturing and construction sectors this week pointed to signs that the UK economy could be slowing down.

Economists have also cited fears that a vote to leave the European Union may have a negative impact on UK economic growth.

Bank of England governor Mark Carney said during last month's interest rates announcement that it was ''more likely than not'' that rates would need to rise over the next two years.

The Bank also forecast inflation to edge up to 0.5% in the first quarter of this year.

Since then he has told MPs during a hearing at the Treasury Select Committee that, if needed, the Bank could launch fresh stimulus measures to boost the UK economy, including buying assets through quantitative easing or cutting interest rates closer to zero.

But he said it would not follow the likes of Japan by installing negative interest rates.

The European Central Bank has already moved to bolster Europe's economic fortunes by cutting the main interest rate from 0.05% to 0% and expanding its quantitative easing programme from 60 billion euro (£46.9bn) to 80 billion euro (£62.5bn) a month.

Howard Archer, chief European and UK economist at IHS Economics, said: ''We are doubtful that the Bank of England will relax monetary policy - either through trimming interest rates to 0.25% (which the Bank of England has now indicated is possible) or reviving quantitative easing - as we do not believe that the UK economy is weak enough to warrant such a move.''

The Office for National Statistics (ONS) confirmed in February that the wider economy grew by 0.5% during the fourth quarter of 2015 in its second estimate of GDP.

But recent disappointing economic data has suggested growth may have slowed to 0.3% in the first quarter of 2016.

Read More

From Belfast Telegraph