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MPC votes to hold base rate and QE

The Bank of England’s Monetary Policy Committee has once again voted to keep base rate at 0.5 per cent and its programme of quantitative easing at £375bn.

The decision was widely expected as BoE governor Mark Carney said in August the MPC will not consider increasing until unemployment falls below 7 per cent or there is an unexpected spike in inflation. At the time the BoE predicted rates will not rise until at least 2016.

But recent falls in unemployment have suggested the threshold could be breached before that date, prompting economists to predict a lowering of the threshold to 6.5 per cent. Unemployment currently stands at 7.3 per cent.

Capital Economics UK economist Samuel Tombs says: “Since there are no signs that falling unemployment is stoking inflation, the MPC could do more to support the recovery by lowering the jobless rate threshold.”

Legal & General Mortgage Club director Jeremy Duncombe says: “At the moment many commentators believe we are likely to see an interest rate rise in 2015. But borrowers should not be complacent.

“The reality is lenders will price in a base rate increase well in advance of any decision and therefore the historically low rates we have seen in recent times are not set to last.”


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