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Feb
11th

INTEREST RATES HELD By: Gordon

The Bank of England held interest rates at their historic low of 0.5pc, in a widely-expected move, but some economists are predicting a rise as soon as next month as inflation creeps up.

The market is anticipating a move in May, but some economists believe a move will come sooner than that. JP Morgan was forecasting a 40pc chance that borrowing costs would be put up today, the first rise in almost two years.

Last month’s meeting of the Bank of England’s Monetary Policy Committee saw two of the nine members vote to raise rates to 0.75pc, and economists say more members may plump for a rise this time after warnings that the Consumer Prices Index measure of inflation could hit 5% in the coming months.

There is pressure on the MPC to raise rates because CPI has been above its 2pc target for more than a year and hit 3.7pc in December.

The British Retail Consortium (BRC), by contrast, has urged the Bank to hold its nerve in the face of mounting inflationary pressures and warned that a rise could damage the economic recovery, which is in doubt after GDP contracted by 0.5pc in the final quarter of 2010.

At a personal level the interest rate uncertainty is affecting mortgage rates and the consensus opinion is that a fixed rate would be beneficial, provided you have enough equity to obtain attractive rates. Please call Haxton, Chartered Accountants for West London, if you require assistance.

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