The Bank of England’s Monetary Policy Committee (MPC) has once again voted to hold the central
bank’s base rate at 0.5 per cent. The rate has now been unchanged for two years – at the lowest
level since the Bank of England was founded in 1694.
Some analysts had speculated that the rate could have risen this month, after three of the nine
members of the MPC voted to increase the rate in February. With inflation running at twice the
Bank’s target rate of 2 per cent, it faces increasing pressure to hike rates in a bid to tackle inflation.
The Bank has so far resisted these pressures, insisting that inflationary stability is on the horizon, and
that the current high inflation figure is influenced by factors such as January’s VAT increase.
The Confederation of British Industry’s economic adviser, Ian McCafferty, said: “MPC members
continue to have widely divergent expectations about the outlook for inflation, so this decision
comes as no surprise.”
“The short-term data continue to cloud the issue, but there are growing risks of inflation becoming
more ingrained as firms attempt to bolster their profit margins and employees seek higher wage
rises in the face of sharply increased costs of energy and commodities,” he added.
Meanwhile David Kern, chief economist for the British Chambers of Commerce, commented on the
uncertainty faced by businesses due to month-to-month speculation over when and by how much
interest rates might rise.
“While the MPC cannot forecast its future actions, the way it currently communicates can create
uncertainty. The MPC must address this in order to give businesses and market analysts a greater
degree of predictability,” he said.
Many analysts expect interest rates to start rising from May, however it remains to be seen how the
appointment of new MPC member Ben Broadbent will influence the central bank’s policy decisions.
