BoE keeps interest rate rise on hold and retains easing level

12 May 2011 | By Natalie Holt

The Bank of England’s monetary policy committee kept bank rate on hold at 0.5 per cent last week, pushing back expectations of a rate rise until later in the year.

The MPC has also maintained the level of quantitative easing at £200bn.

It follows figures published by the Office for National Statistics last month which showed the UK economy grew by 0.5 per cent in the first three months of 2011, effectively cancelling out the 0.5 per cent fall in GDP in the final quarter of last year.

A rate rise had been expected this month but, in light of the growth figures and weak figures from the manufacturing and construction sectors, forecasters are now predicting a rate rise much later in the year, if then.

John Charcol senior technical manager Ray Boulger says: “The City has belatedly recognised that there are far too many problems in the economy for the MPC to increase bank rate in the next few months. For the second time in as many months, the majority of economists have yet again put back their expectations of an increase by a further three months.

“November now appears to be the majority view but there is also an increasing number who are acknowledging the year may well end with bank rate still at 0.5 per cent.”

Legal & General Mortgage Club managing director Ben Thompson says: “Some previous predictions pointed to this month for the first rate increase. Our belief is the earliest possible rise will be in August but it is likely that we will not see a change until some time after this as the economic recovery remains very fragile in many parts.”

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