Bank of England expected to keep interest rates on hold

Interest rates will be kept on hold today as Bank of England policymakers continue to believe that it is too early to scale back stimulus efforts

Gareth Fuller/PA Wire The Bank of England in London
The Bank of England in London

Interest rates will be kept on hold today as Bank of England policymakers continue to believe that it is too early to scale back stimulus efforts.

Most economists expect the Bank’s Monetary Policy Committee (MPC) will not lift interest rates from 0.5% - where they have been since 2009 - until next year.

This month’s meeting of the MPC ended last night in order to allow some members to attend International Monetary Fund meetings in Washington.

Investec chief economist Philip Shaw said the shortening of April’s meeting was telling in indicating that very little looks set to change this month.

He said: “For now with the economy growing respectably but not roaring away, we see it likelier than not that the MPC will avoid tightening policy this year, especially with inflation expected to remain below target over the medium term.”

With the Consumer Prices Index (CPI) rate of inflation at 1.7% - comfortably below the Bank’s 2% target - the MPC has leeway to leave rates on hold.

According to the IMF, the UK is set to be the world’s fastest-growing major advanced economy this year with GDP expected to increase by 2.9%.

The IMF’s latest World Economic Outlook gave its backing to policies pursued by Chancellor George Osborne and Bank of England governor Mark Carney but warned over the risk posed by surging house prices.

GDP remains below its pre-recession level six years ago and latest monthly survey figures from the three main sectors of the economy are unlikely to shake the MPC from its caution over the state of the recovery.

They showed that while construction, manufacturing and services were all continuing to grow robustly in March, the pace of expansion had slackened off, indicating that the recovery had slowed to its weakest pace in nine months.

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