Despite a call from the British Chamber of Commerce to increase its support with a £50 top up on the £275 billion quantitative easing (QE) programme, the bank has kept rates low.
However, the Monetary Policy Committee has maintained QE at £275 billion.
This is good news for homeowners on a variable rate mortgage. They can continue to enjoy low repayment rates of interest. Those in debt will also continue to benefit from having to pay back minimal interest.
Savers and retirees will also be hit further by the low rates as they see very little return on their savings. It could be worth shopping around to find the best savings options for you.
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A poll by Reuters found that economists predict the first rate rise will come in the middle of 2013. Other industry experts are less hopeful about a rise and believe that there won’t be one until 2015 at the earliest.
The UK economy is weak and potentially on the brink of another recession as it attempts to deal with the Euro-zone crisis and mounting national debt.
While inflation shows signs of easing, it is unlikely to be enough for the BOE to increase interest rates. The Bank of England could be holding back on increasing the base rate in order to deflect the high levels of inflation.
The target rate for inflation is 2%. It did peak at 5.2% in September but has since dipped to 4.8%.
David Kern, Chief Economist at the British Chambers of Commerce said;
“With the government’s tough deficit-cutting measures squeezing domestic demand, and problems in the euro-zone creating difficulties for our exporters, UK monetary policy must remain as expansionary as possible.”