The Bank of England’s Monetary Policy Committee (MPC) voted unanimously yesterday to hold the Bank Base Rate at its record low of 0.5% – the 88^th month in a row.

This is good news for mortgage borrowers on a variable rate deal as the Base Rate influences wider interest rates, so it’s unlikely they will see an increase in their mortgage pay rate in the near future.

However, for savers, they’ll have to put up with dismal savings rates for longer as the MPC looks to meet its 2% inflation target to “sustain growth and employment”.

The MPC on the EU referendum

The MPC said the 12-month CPI inflation was 0.3% in May which remains well below the 2% inflation target. The shortfall is owing to “unusually large drags from energy and food prices”.

But the report stated that an increasing range of financial asset prices have become more sensitive to market perception of the likely outcome of the forthcoming EU referendum, adding that “the most significant risk to the MPC’s forecast concern the referendum.”

It stated: “On the evidence of the recent behaviour of the foreign exchange market, it appears increasingly likely that, were the UK to vote to leave the EU, sterling’s exchange rate would fall further, perhaps sharply.

“In addition, UK short-term interest rates and measures of UK bank funding costs appear to have been materially influenced by opinion polls about the referendum.  These effects have also become evident in non-sterling assets: market contacts attribute much of the deterioration in global risk sentiment to increasing uncertainty ahead of the referendum.

The MPC added that while consumer spending has been solid, the uncertainty about the referendum is leading to “delays to major economic decisions.”

‘No surprise that rates are unchanged’

Maike Currie, investment director for personal investing at Fidelity International, said: “One week before the EU Referendum vote, it comes as no surprise that the Bank of England has decided to maintain interest rates at a record low.

“The nation gearing up for the vote next week is a short-lived uncertainty, but there are more persistent economic factors causing a drag on growth. Weak inflation, a slowing economy and low wage growth presents a cocktail of concerns which has no doubt contributed to this decision.”