Loan Rates Likely To Remain On Hold For Some Time
It looks as though the base rate of interest on loans and savings will remain on hold for some considerable time to come, as the Bank of England has just published the latest minutes from the most recent Monetary Policy Committee (MPC) meeting, held earlier this month.
The minutes have shown that only two members of the MPC voted to increase loan rates. Spencer Dale and Martin Weale, both maintained their view from previous meetings an voted for an increase of 0.25 per cent to increase the base rate for loans and savings to 0.75 per cent.
However the remaining seven members of the committee all agreed that loan rates should stay on hold at 0.5 per cent, until the economy in the UK shows some more positive signs of recovery.
One of the biggest arguments for increasing interest rates has been that of the high rate of inflation in recent months. However, this has fallen over the course of the last month from 4.5 per cent to 4.2 per cent, thereby allowing the MPC more breathing space on keeping loan interest rates at their current low level.
A spokesman for the Centre for Economics and Business Research (CEBR) said “Overall, we think the MPC’s majority view on monetary policy is about right. With the Eurozone on the brink of a potential meltdown amidst the ongoing sovereign debt crisis, the possibility of another recession in the Western economies remains a distinct possibility.”
“Tightening monetary policy against this backdrop could prove a major policy error. A sharp weakening in the UK economic outlook cold warrant further quantitative easing- we may actually see a further loosening in monetary policy before interest rates start rising again.”
