Interest rates on hold yet again

Posted on May 5th, 2011 | Categories - Financial News, Mortgages, News, Savings

There are only so many ways to write a story on interest rates remaining unchanged; however the bare facts remain the same, no rise in rates and no further Quantitative easing measures.

To be fair recent economic data showing a slowdown in sectors of the economy pointed to no change this month and indeed in the short term. In a separate move the European Central Bank left rates unchanged, following last month’s rise, at 1.25%.

Although inflation, as measured by CPI (Consumer Prices Index) is currently running well above the bank’s 2% target, the members of the Monetary Policy Committee (MPC) clearly see this as less damaging to the economy than a rise in interest rates.

Many experts agree that whilst the economic recovery remains patchy a rise in interest rates would be damaging to industry.

As usual the decision not to change rates was welcomed by The British Chambers of Commerce (BCC), David Kern said: “Inflation, though well above target, saw a fall to 4% in March, and combined with subdued wage pressures, the arguments for an increase in rates have weakened considerably in recent weeks. At a time when the government is tightening fiscal policy through its deficit-cutting programme, premature rate increases could have a severe impact on growth and jobs.”

The decision will also be welcomed by those people with variable rate mortgages, although savers will not be as happy as they continue to struggle to find interest rates to compete with inflation.