Bank of England holds rates at 0.5pc

Bank of England

The Bank of England has held interest rates at 0.5% for the 71st month in a row and kept its stimulus programme of quantitative easing (QE) unchanged.

Most forecasters now think interest rates will not rise before next year.

Last month, the Office for National Statistics said the UK economy grew by a slower-than-expected 0.5% in the last three months of 2014.

Low oil prices and falling inflation in the UK have also removed any pressure on the Bank to raise interest rates.

The meeting of the Bank’s Monetary Policy Committee (MPC) in January saw all members of the Committee vote to hold interest rates at their current level.

So-called interest rate “hawks” Ian McCafferty and Martin Weale had previously voted for a 0.25% rise in interest rates at each meeting of the MPC since August last year.

March’s MPC meeting will mark the sixth anniversary of the decision to cut interest rates to 0.5%.

If interest rates remain unchanged at the March meeting, it will mark the fourth longest period of time without a change since the founding of the Bank of England in 1694.

Inflation

Howard Archer, chief UK economist at at IHS Global, said a rate rise later this year was still likely.

He said: “The Bank of England has stressed the importance of looking through recent and likely further near-term very weak inflation developments resulting from sharply reduced oil prices and focusing on the medium-term inflation outlook, which suggests an interest rate hike late on in 2015 remains a very real possibility.”

In November, the Bank forecast inflation would average 1% in the first three months of 2015, rising to 1.4% in the fourth quarter of 2015 and 1.8% by late 2016.

But since those forecasts, oil prices have fallen further and governor Mark Carney has said price growth is likely to turn negative in the coming months.