Bank of England Freezes Interest Rates Again

Published / Last Updated on 24/06/2021

The Bank of England Monetary Policy Committee (MPC) has today voted unanimously to keep bank interest rates at the record low of 0.1% pa despite inflation pressure starting to build.

The MPC cited that UK gross domestic product was still in recovery mode during the pandemic with GDP forecast to be up 1.5% on earlier predictions.  The economy is starting to wake up.  It also suggested that despite higher CPI inflation at 2.1% pa and earnings inflation at 5.6% pa, it expects the economy to outperform this, so there is no need to press the interest rate ‘panic button’.


The Bank’s stance may be that business and consumer confidence will increase towards the autumn and is that when interest rates will rise?  We suggest not likely whilst we all wait to see the real impact of Brexit, covid-19, the end of the furlough scheme and mortgage holidays, stamp duty holidays and eviction bans, these are going to start to affect the economy over the next year or so.  Many businesses may not survive post pandemic after government support is withdrawn.  So keeping interest rates fixed may be a sensible ‘wait and see’ move.

That said, we have said it before and we say it again:  There is no way the British government or other countries can afford to repay their covid-19 debt.  We know that many central banks have already signposted that they will not increase interest rates to control inflation for the ‘foreseeable future’ i.e.  they want inflation.  A sustained period of inflation will devalue fixed rate government debt over the years and this is why we expect inflation to build and be maintained for at least 1 and maybe 2 years with interest rates not being used to control the same until 2023 and possibly 2024.

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