Bank of England to hold record-low rates

April 10, 2014 - 7:40:59 am

LONDON: The Bank of England is forecast to freeze interest rates at a record-low 0.50 percent, amid caution over the strength of Britain’s economic recovery, analysts said.

The central bank’s nine-strong Monetary Policy Committee (MPC) is also expected to maintain its quantitative easing (QE) stimulus at £375bn. 

Policymakers will hold a shortened meeting, instead of over two days, to allow some members to attend the International Monetary Fund’s spring meetings in Washington. The outcome will be announced at 1100 GMT today.

“The April policy meeting is unlikely to rock any boats,” said Rabobank economist Jane Foley.

“UK data releases over the past month have confirmed a continued decline in the number of jobless claimants and a simultaneous fall in the inflation rate.

“On balance, there has been little evidence to change our expectation that steady policy is likely to prevail until May 2015 when the BoE is likely to commence a slow upwards adjustment in the bank rate.”

The BoE had last year vowed not to start lifting rates until the unemployment rate falls to at least 7 percent, under a forward guidance policy launched by governor Mark Carney.

However, the bank tweaked its strategy after the rate fell more sharply than anticipated.

Under amended guidance, the BoE will now seek to absorb all the spare capacity in the economy as it looks to keep inflation close to a government-set target of 2 percent, before hiking rates.

The unemployment rate has held steady at 7.2 percent, having fallen to a near five-year low of 7.1 percent late last year.

Britain’s 12-month inflation rate meanwhile slowed to 1.7 percent in February, the lowest level for more than four years. AFP