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Bank of England keeps interest rates at 0.5%

Anna Fedorova
Written By:
Anna Fedorova

The Bank of England’s Monetary Policy Committee (MPC) has once again kept interest rates unchanged in a widely expected decision.

At its monthly meeting, the UK’s central bank decided to maintain interest rates at the historic low level of 0.5%.

The MPC is also holding fire on its quantitative easing programme – which currently stands at £375bn – in the hope that recent inflation increases may be a positive signal for the UK economy.

UK inflation remained unchanged at 2.7% in November, after jumping from 2.2% in October.

Despite the recent up-tick, the Bank of England’s forecast for economic growth in the UK in 2013 is relatively gloomy, ensuring that a rate hike is a long way off.

On Monday, Citi predicted interest rates in the UK will remain at historic lows for four more years as the economy struggles to recover.

Interest rates have been held at a record low of 0.5% since March 2009 following an aggressive easing policy.

Citi also cut its 2013 UK growth forecast from 0.8% to 0.4% and said output will rise by only 0.5%-1% in 2014, far below the Treasury’s estimates.

As a result the investment bank expects the Bank to keep interest rates at 0.5% until mid-2017 – a year longer than originally expected.

Despite the hopes for improvements, last week many of the leading think-tanks warned the UK may be balancing on the edge of a triple-dip recession, with weak growth prospects for 2013 meaning there is a risk of another two quarters of negative growth.