Interest Rates Frozen Again

Interest Rates Frozen Again.

As expected, the Bank of England Monetary Policy Committee (MPC) has met again today and decided to keep interest rates at 0.5%pa.

Pressure has been gradually building on the Bank of England to increase interest rates as the economy is in recovery with fears that the economy will overheat and inflation could creep back up.

Central bank rates have now been frozen for over 5 years at 0.5% and surprisingly, inflation has taken a fall to 1.7%, which is below government trend target of 2% meaning that pressure has eased.

Comment

We suspect that wages will shortly start to rise and this will then drive inflation up which in turn will force the Bank of England’s hand in 2015.

Expect rate increases, but second guessing whether this will be before or after the general election in May 2015, is unknown.  The Bank of England is supposedly independent of government, but we are sure political pressure may hold rate increases off until after May 2015.

Interest rate rises – yes, but we suspect Summer/Autumn 2015.