The Bank of England has left interest rates unchanged; Bank base rate remains at 0.5% Furthermore, no new Quantitative easing (QE) measures will be introduced.
Whilst not a surprise the decision comes despite inflation continuing to rise and growing calls for a slow tightening of monetary policy. Indeed the three members of the MPC (Monetary Policy Committee) voted last month for an increase to interest rates.
Mervyn King, Governor of the Bank of England, has consistently stated that he believes inflationary pressures are temporary and that inflation will fall towards the end of 2011 and into 2012. However many experts believe that an increase in interest rates is now only a matter of time and that a series of small rises sooner rather than later would be preferable larger rises later in the economic cycle.
As always the news will be welcomed by business as it will keep the cost of borrowing low. However savers will continue to struggle to find returns which will allow them to get a real, above inflationary return, on their capital.