Bank of England Holds Interest Rates at 0.5%

The Bank of England’s Monetary Policy Committee (MPC) did as expected and held the benchmark lending rate at 0.5 percent. This is the fourteenth straight month that interest rates have remained unchanged.

Comments from the MPC meeting do show that some committee members raised concerns over the level of inflation as recent data indicates inflation is running at 3 percent. This is well above the 2 percent target rate and ordinarily, the Bank could be expected to raise rates in a bid to cool the economy.

However, the MPC noted that some of this growth can still be attributed to the £200 billion (US$304 billion) injected into the economy as part of the stimulus spending program. As such, committee members feel that the ongoing recovery remains too fragile yet to introduce rate hikes.

There is also the question of the upcoming general election on May 6th. Some analysts have suggested that the MPC will remain in the background until after the election to see if there are significant changes intended to the country’s fiscal policy.

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