The Bank of England has announced this week that its Monetary Policy Committee (MPC) has voted to keep interest rates at their historic low of 0.5%, where they have now been for more than six years.
The decision was actually taken at the end of last week but because of the General Election on the 7th, the result was not published until this week so as not to sway voters. The MPC also voted to leave the scale of its quantitative easing (QE) stimulus programme unchanged at £375bn.
All eyes will now be on the Bank’s Governor, Mark Carney, tomorrow (May 13), when he updates markets for the first time in many weeks, as the MPC has been kept in ‘purdah’ for six weeks while the election campaign was being carried out.
The Committee will now take stock of the economic situation, digesting recent movements in oil prices and the state of Sterling before making any further decisions on how and when interest rates will rise.
Economists had predicted that there would be no change in interest rates unless there had been a major change in government, as inflation remains low, the revival in pay growth is still slow in coming and signs of weakness in the global policy would suggest that a tighter monetary policy is not on the cards yet. In fact, it is still thought likely that the rate will remain where it is until at least the first quarter of next year, as, if anything, the case for keeping the rate at 0.5% has, if anything, strengthened.