Bank of England bank rate has been held at 0.5 per cent for the 27th month in a row, with quantitive easing held at £200bn.
The last rate change was on March 5, 2009, when it was cut from 1 per cent. On the same day, the bank started a £75bn QE programme. The most recent change to the size of the programme, on November 5, 2009, was a rise of £25bn, bringing the total to £200bn.
Minutes from the monetary policy committee’s May meeting show a split over a rate rise, with six members voting in favour of keeping it the same and three voting for a rise.
Inflation stands at 4.5 per cent, well above the Government’s target of 2 per cent, putting pressure on the bank to raise rates.
Former MPC member Andrew Sentence, who was replaced by Ben Broadbent in May, warned the bank earlier this month it is in danger of losing its credibility with the public due to its failure to tackle inflation.
Legal & General Mortgage Club managing director Ben Thompson says: “The bank remains in the thick of it, on the one hand needing to ensure that a sustainable economic recovery is baked in, on the other hand, ensuring it does not lose its credibility as an independent rate-setter that is capable of maintaining a controlled and low inflation economy. It is a tough one, but the recovery has to come first.”
PPR Estates director Nick Hopkinson says: “The Bank of England is not going to be able to increase interest rates this year, even though inflation is running away from it. UK Plc is still very weak and any increase in borrowing costs would almost certainly tip the scales back into recession.”