Bank of England keeps interest rates on ice

Posted on 7 Jul 2011 by The Manufacturer

For the 28th consecutive month, the Bank of England announced today that interest rates will remain frozen – matching City forecasts of no rises until next year.

The predictions offered by finance and economics commentators across the country were proved correct when the Bank of England governor Mervyn King today confirmed that interest rates would not rise for the 28th month in a row.

UK economist at RBS Ross Walker warned that while sluggish UK growth is to be expected, the economy remains at risk from world events: “The main surprises and economic shocks have been overseas, notably the escalation of the euro area sovereign debt crisis and huge swings in sentiment around the outlook for the US economy.”

Commenting on today’s decision from the Monetary Policy Committee (MPC), Ms Lee Hopley, chief economist at EEF said: “The decision for no change was a sure fire bet. Inflation may still be uncomfortably high, but the outlook hasn’t materially shifted. On the growth front however, there are now some emerging signs of weakness at home and abroad.”

“Given the balance of views the committee looks set to wait and see how a number of global uncertainties play out over the next few months and whether some of the weakening we’ve seen on the UK front proves to be temporary,” she added.

Ian McCafferty, CBI chief economic adviser, said: “Mixed messages from recent data leave the MPC in a difficult position. Inflation expectations are on the rise, raising questions about the Bank’s anti-inflation credibility, but activity continues to be patchy, with one-off factors such as the disruption from Japan and the extra bank holiday clouding their assessment of the underlying strength of the economy.”

George Archer