Bank Of England Base Rate Announcement 05/08/2010
Bank of Englands Monetary Policy Committee (MPC) today held interest rates at a widely-expected 0.5% - marking the 17th consecutive month they have remained at the historical low.
The last rate move was in March 2009 with a drop from 1.0% to 0.5%.
Interest rates were left at their record low of 0.5% amid fears about the strength of the economic recovery.
The decision showed the majority of the committee is more worried about weak economic growth than high levels of inflation. The City is split over the outlook for the economy and the Banks next move. Some believe rates will start to rise in early 2011 to bring inflation at present running at 3.2% and above the Banks 2% target for months back under control. Others reckon rates will stay on hold for the next few years to stimulate demand.
The MPC also left its £200bn quantitative easing programme unchanged.
There is also concern over the economic impact of the Government's public sector cuts.
Bank Governor Mervyn King recently stressed the importance of sustained economic growth, hinting of further stimulus measures. He told a committee of MPs there has been no discussion of "applying the brakes" yet.
In June and July, lone MPC dissenter Andrew Sentance called for an increase in rates, arguing the inflation outlook warranted a hike. This week, former Bank policy members Sir John Gieve and Charles Goodhart said interest rates will have to rise earlier and more sharply than expected to keep inflation under control.
But lingering doubts about the strength of the economic recovery have prompted some analysts to forecast rates will be held at their historical lows until the end of next year.
Meanwhile, the European Central Bank (ECB) today kept eurozone interest rates on hold at 1%, as expected - the 15th month in a row rates have remained at the record low.
