Bank holds interest rates again.....
The Bank of England's Monetary Policy Committee (MPC) has kept UK interest rates on hold at 0.5%, and unveiled no new quantitative easing (QE) measures.Both decisions were expected, but the level of division will not be clear until the minutes of the meeting are released.At the MPC's January meeting, there was a three-way split among its nine members. At that meeting, two members voted for a rate rise, and one for more QE.Policymakers have been under pressure to consider raising rates from historic lows in a bid to rein back inflation.However, data showing a surprise 0.5% contraction in UK GDP during the last three months of 2010 appeared to make an imminent rate rise less likely amid fears it would stifle recovery.
The latest official inflation data showed that Consumer Prices Index (CPI) inflation rose to 3.7% in December, well above the target rate of 2%, led by price rises in food and fuel.“ Fixed [mortgage] rates will get more expensive in the short term and so anyone wanting a fixed rate should snap one up quickly”
Ray Boulger Mortgage broker, John Charcol
Last month, Bank England governor Mervyn King forecast that inflation could rise to 4-5% in the coming months because of higher food and fuel prices and a rise in VAT. However, he also added that inflation would fall back sharply in 2012. So the Bank faces a difficult choice - either keep interest rates low to try to aid the economic recovery, or raise them to try to cool inflation. Raising rates takes demand out of the economy and slows down inflation. But it also increases the cost of borrowing and there are concerns this may tip the economy back into recession.
The Bank's key interest rate has been at 0.5% since March 2009.