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No new clues over when base rate will rise

No new clues over when base rate will rise

Category: Money

Updated: 23/03/2011
First Published: 23/03/2011

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 It is now over 6 months old so the content may be out of date.

No new members of the Bank of England's Monetary Policy Committee voted to increase base rate this month, further muddying the waters 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 March, the same number as in February.

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

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

With inflation rising sharply in recent months, pressure has been growing for the Bank to start raising rates to get it back under control.

Only yesterday, the Office for National Statistics revealed Consumer Prices Index inflation had soared to 4.4%, its highest level for more than two years.

Retail Prices Index (RPI) inflation, which includes costs associated with housing, has reached 5.5%, its highest level for 20 years.

The Bank admitted there was a significant risk inflation could rise above 5%, but said its medium term outlook remains unchanged.

Policymakers will also be wary about the effect an increase in base rate might have on 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 March 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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