By Marcus Leach
The Bank of England’s Monetary Policy Committee (MPC) today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%.
The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.
“This decision was never in doubt as those dovish members of the MPC will be waiting to see if the GDP figure for the 1st quarter suggests that we are clear of double-dip fears," Jeremy Cook chief economist at World First foreign exchange said.
“Then, and only then, will we see a majority vote for a rate rise.
While the announcement will be well received by business, commentators expect the rate to be raised from its historic two year low within the coming months, as Mark Bolsom, Head of the UK Trading Desk at Travelex Global Business Payments explains:
“In terms of what this means for the UK, economic data released yesterday confirms the view that the UK economic recovery is too fragile to withstand a tighter monetary policy. It would be far too premature for the Bank of England to raise rates now, against the current backdrop of government spending cuts and higher taxes. With that in mind, I believe that UK interest rates are unlikely to rise until mid-2011, as the Bank comes under pressure to curb rising inflation. And even then, I think they will only raise it by a quarter percent.