MPC holds interest rates at 0.5%
Consumers continue to feel the benefits of the lowest ever interest rate.
Retail and fast moving consumer goods firms rely on consumers’ spending activity - and the low interest rate of the last 11 months has helped boost purchasing power.
The Bank of England’s monetary policy committee (MPC) voted to keep the cost of borrowing at the record low of 0.5 per cent yesterday (February 4th), meaning the base rate has now been at this level for nearly an entire year.
Keeping the rate at 0.5 per cent should have encouraged borrowers to keep spending because, generally speaking, the repayments they have been making on mortgages and loans will have most likely dropped.
It has been widely reported that one of the main drivers of recent strong retail sales has been the low interest rate.
Chief Economic Adviser at the Confederation of British Industry Ian McCafferty said the MPC’s decision to keep the rate at half a percentage point was “unsurprising”.
However, he added: “As the economy recovers the bank will have to start to think about returning monetary conditions towards more normal levels. We would expect this to lead to a small rise in interest rates around the middle of this year.”
Written by Daniel Wilson
