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No fresh clues over when base rate will rise

No fresh clues over when base rate will rise

Category: Money

Updated: 20/04/2011
First Published: 20/04/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

No new members of the Bank of England's Monetary Policy Committee voted to increase base rate this month, further adding to the mystery as to when rates will start to rise.

The minutes of the latest rate setting meeting revealed that six members of the committee voted to keep base rate on hold at 0.5% earlier in April, the same number as in the previous two months.

Three members still favoured a rise in the rate, which has now remained at its historic low for over two years.

Andrew Sentance continued to push for an increase to 1%, while Spencer Dale and Martin Weale preferred an increase to 0.75%, as was the case at the previous two meetings.

While mortgage borrowers have benefitted from the low interest rate environment, savers have struggled to find savings accounts that pay a decent rate of return.

The problems facing savers have been compounded by the high rate of inflation eroding the value of their savings.

The latest official figures showed inflation unexpectedly dropped in March to 4%, easing slightly the pressure on the Bank to start raising rates to get it back under control.

In the minutes, the committee admitted the risk that inflation could either rise or fall significantly in the medium term was substantial.

It added, however, that the outlook had not changed sufficiently over the month to alter its view.

The committee members will also have in the back of their mind how an increase in the base rate might affect the recovery of the economy.

With regards to quantitative easing, a measure the Bank introduced to boost the economy, Adam Posen was alone in calling for change at the April meeting.

Maintaining the stance he has adopted since last October, Mr Posen said the asset purchase programme should be increased by £50 billion to a total of £250 billion.

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