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Bank opts to freeze interest rates once more

Bank opts to freeze interest rates once more

Category: Economy

Updated: 10/02/2011
First Published: 10/02/2011

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 It is now over 6 months old so the content may be out of date.

The Bank of England has announced that the base rate of interest will remain at 0.5% for another month at least.

It means the measure is closing in on two years at the current historical low, as it was last changed in March 2009, when it was cut from 1.0%.

The Monetary Policy Committee (MPC) has faced calls to implement a rise sooner rather than later in a bid to help offset high inflation.

Last month, two members of the MPC voted to increase the measure, although they found themselves in the minority, with the other seven members opting to leave it on hold.

Better-than-expected service sector data had prompted calls for a rise in rates, although the British Chambers of Commerce (BCC) warned against such a decision last week.

"We are concerned that recent positive figures could heighten pressure on the MPC to raise interest rates too early," said David Kern, chief economist at the BCC.

"The UK recovery is still fragile and the more forceful implementation of the Government's austerity plan will inevitably have negative effects on business cashflows and consumer disposable incomes."

The near two years at 0.5% has been a mixed blessing for consumers.

On one hand, many homeowners have seen their mortgages become more affordable and the low rate has been cited as a major factor in keeping repossession and arrears figures down.

Savers have been dealt a harsher hand, however, and low returns have been compounded by inflation that has comfortably outstripped the Government's long term target of 2%.

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