Bank of England decides to keep rate at 5.5%
January 16, 2008
Following the last Monetary Policy Committee meeting held last week, the Bank of England has decided to keep interest rates on hold at 5.5%. Interest rates fell from 5.75% to 5.5% in December in a move that was welcomed by both industry and consumers. This followed a series of five interest rate hikes of 0.25% each between August 2006 and July 2007, which saw many homeowners struggle to keep up with repayments on their mortgages and saw the level of repossessions in the UK rocket.
According to officials the Monetary Policy Committee members had to determine whether the risk of a slowing economy was greater than the risks posed by rising inflation. It appears that last month, when interest rates dropped, the MPC members put inflation worries on the back burner and saw a slowdown in the economy as a greater risk, thus deciding to cut rates. However, this month, despite expectations from many that interest rates would fall, the MPC decided to keep rates unchanged.
Following the announcement Trevor Williams of Lloyds TSB Corporate Markets stated: “Rising energy prices and their knock-on impact on inflation, a slowdown in the housing market and weakening retails were all factors for the MPC to consider. But inflation is the key concern of the MPC and they clearly wanted to wait until February’s quarterly inflation report, which brings all of these factors together, for reassurance that the time is right to cut interest rates again.”
He added: “Given the uncertainty over the extent of the economic slowdown, the MPC was right to resist cutting interest rates today.”
However, an official from the British Chambers of Commerce responded to the announcement by stating: “A modest interest rate cut would have alleviated the threats to the banking system and would have helped restore the smooth flow of credit in the economy.”
Related Articles
- Increased affordability for many first time buyers due to interest rate cuts Officials from the Council of Mortgage Lenders have recently stated that affordability for first time buyers could be increasing, with interest rates already having fallen
- Bank keeps savings rate on hold Despite the 0.25% interest rate cut announced by the Bank of England earlier this week, the Icelandic online bank Kaupthing Edge has decided to keep
- Experts predict cut in interest rates Many economists are predicting that the Bank of England will be cutting interest rates this week following the Monetary Policy Committee meeting. It is widely
- Free HIPs may not be as good as it sounds HIPs, or Home Information Packs, have caused a lot of controversy over recent months since they were introduced, with many homeowners and industry professionals, such
- Banks start to cut savings account rates Earlier this month the Bank of England cut the base rate by 0.25% from 5.75% to 5.5% in a move that was welcomed by many
Comments
Got something to say?