Business World

Tuesday 23 January 2018

Bank of England keeps interest rate at all-time low

Bank of England governor Mark Carney. Photo: Reuters
Bank of England governor Mark Carney. Photo: Reuters

William Schomberg

The Bank of England kept interest rates at their record low yesterday as policymakers wait to see whether a tumble in inflation is short-lived or turns into a bigger threat to the British economy.

In its last interest rate decision before the May 7 General Election the Bank left its benchmark borrowing rate at 0.5pc, its level since the height of the global financial crisis in 2009.

Britain saw the fastest growth among major advanced economies last year and is expected to expand by as much as 3pc this year, despite a possibly weaker start to 2015.

Pay growth is also starting to pick up.

But at the same time, inflation has fallen sharply on the back of the slump in global oil prices. It touched zero in February, easing pressure on the BoE to start weaning the economy off its very low borrowing costs.

All the bank's rate-setters have voted to keep rates on hold since the start of the year because of the inflation slump.

But its chief economist, Andy Haldane, surprised investors last month by saying a rate cut was just as probable as a rate hike because inflation might not rise as forecast over the coming months.

The BoE forecast in February that inflation would touch its 2pc target in two years' time.

Mr Haldane's view has been challenged by other BoE officials. Governor Mark Carney and other rate-setters have said they expect the next move on interest rates will be a hike.

Economists polled by Reuters this month predicted a first rate increase by the BoE in early 2016. (Reuters)

Irish Independent

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business