No change in base rate for January 2008
October 5, 2008
The Bank of England recently announced that the base interest rate is to remain unchanged in the UK. The announcement came late last week following the Monetary Policy Committee meeting. Many officials state that the MPC meeting is likely to have been a tough one given that members of the committee would have to juggle concerns about a slowdown in the economy with concerns over rising inflation. Interest rates will now stay on hold at 5.5% for the month of January, but many expect an interest rate cut to be applied in February.
Interest rates rose from 4.5% to 5.75% between August 2006 and July 2007 in a series of five interest rate hikes of 0.25% each. In December 2007 the Bank of England decided to cut interest rates to 5.5% amidst worries over the slowing economy fuelled by higher interest rates and the effects of the credit crunch. Many were expecting a further interest rate cut in January, and the announcement that there will be no change has caused disappointment for many.
After the Bank of England’s announcement one official from the British Chambers of Commerce stated: “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.”
An EEF economist stated: “The evidence from the past month points to a growing risk of a weaker economy and there is little reason to believe the case for a cut will be any less strong next month.” Howard Archer from added: “We suspect that the vote to leave interest rates unchanged today was extremely close.”
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