United Kingdom central bank set to hold interest rates amid slowdown

United Kingdom central bank set to hold interest rates amid slowdown

The Bank of England's Monetary Policy Committee has voted to keep interest rates on hold at 0.5 per cent. They no longer price in a full 25 basis point rate rise in December, according to Reuters data. All investments can fall as well as rise in value so you could get back less than you invest.

The Bank of England has backed away from raising interest rates following a sharp slowdown in growth. But a series of economic reports in the past few weeks cast doubt on whether a rate rise may be on the table.

"I think we will now have to wait until the August MPC meeting before we can expect to see a rate hike, although this will depend in part on the contents of the quarterly inflation report".

An interest rate rise would have helped to strengthen the Pound, but in the event it slipped back from $1.3617 before the decision to trade at $1.3500 at the time of writing (recovering from a low of $1.3471).

Despite anticipation of future rises, the current base rate remains significantly below the pre-crash level of 5.25%, recorded in February 2007.

Officials at the Bank have based their forecast on those predictions.

The committee meets monthly to discuss whether to cut, raise or leave interest rates unchanged, as well as other measures such as quantitative easing. "And keeping rates so low means savers lose out once again".

The course of interest rates depends on inflation falling in line with the Bank's expectations. "With the economy in the doldrums, it's time for a serious rethink-crossing your fingers and hoping for the best does not equal a productive savings strategy".

Majority of members judged that an increase in bank rate was not required at this meeting.

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"We expect the disappointing first quarter to be portrayed as a temporary lull by the MPC. and therefore expect the lack of a hike to be presented as an expected postponement rather than a cancellation", UBS interest rate strategist John Wraith said. This is good news for borrowers but piles yet more misery on savers.

Last November, the bank raised its main interest rate for the first time in a decade, taking back the rate cut it enacted in August 2016, in the immediate aftermath of Britain's surprise vote to leave the European Union.

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"The MPC - rightly - wants to ensure that rates rise in a steady, incremental, telegraphed manner".

Tracker mortgages are now available with very tempting initial rates.

Concluding, Mumford said: "In the meantime, keeping rates where they are will keep money in people's' pockets and should provide some support to domestic stocks in the short-term".

But be wary of jumping into a tracker mortgage now.

In Italy, markets sagged sharply after it became apparent that the leaders of the populist Five Star movement and the Lega party were close to putting together a possible coalition partnership, which could in turn prompt a confrontation with European Union officials over reform measures and tax rises, as well as a spending splurge in defiance of budget rules.

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