Members of the Bank of England’s Monetary Policy Committee (MPC) have voted to keep UK interest rates at 0.5%.
MPC members voted 8-1 to maintain the record low interest rates, the first time that any member of the committee has voted against the general position for many months.
In its latest Inflation Report, the Bank said that an interest rate rise must be postponed because of a “muted” inflation outlook over the next few months. However, Bank governor Mark Carney went on to say that the time for a rise was on the horizon.
A British economy that was still “in need of care and encouragement” seven years after the 2008 financial crisis, the Greek economy still in turmoil, and a drastic collapse in China’s stock market in recent weeks, were all cited as reasons to keep interest rates low.
Carney said that the time for an interest rate rise was “drawing closer”, but that it could not “be predicted in advance”. When the rises do come, he said, they would also be slow and “gradual”.
Discussing how the announcement could affect the public, Hannah Maundrell, editor in chief of money.co.uk, commented:
“This should still be a wake-up call for consumers; we all need to plan ahead. Those on a variable rate mortgage should consider locking into a long term fixed rate while they’re still around. Anyone trapped on a tracker deal needs to work out how much more they’ll need to shell out once interest rates rise and start budgeting. Savers need to beware too; banks are dropping rates in preparation for having to pay more so keeping a close eye on returns is a must. Resisting the temptation of long term fixed bonds that don’t let you get at your money may also be a wise move.”
The Bank said that it expected inflation to return to its 2% target in two years’ time.
