Bank of England leaves rates at record low

As was widely expected the Bank of England has left UK interest rates at a record low of 0.5%.

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by Deborah Hyde on Aug 05, 2010 at 12:00

Bank of England leaves rates at record low

The Bank of England has left interest rates at a record low of 0.5%, as was widely expected.

The Bank's Monetary Policy Committee also said it voted not to pump any more money into the economy.

Some - including MPC member Andrew Sentance - have argued the Bank should lift rates as inflation remains sticky and the economy grew twice as fast as expected in the second quarter. But governor Mervyn King and others within the committee believe there are still risks the economy could begin to shrink again and that inflation will eventually fall back below the 2% target even if the current stimulus is left in place.

Sentance was the only member to vote for a rise at last month’s meeting.

We will not know for another fortnight whether any more committee members voted with him this month, although most believe that is still unlikely given the data here and abroad continues to be mixed.

The recent slump in consumer confidence and the fact that weak sterling has still not boosted exports are a particular worry for the committee.

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4 comments so far. Why not have your say?

Come on give savers a break! It's about time rates were upped.

Anyone who has been careful and saved is being punished by devaluation of the GPB and inflation.

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Wrong decision today by the MPC for the following reasons:-

*Interest rates were reduced to an all time low of 0.5% early last year during a severe financial crisis facing the country. We are no longer in such a serious situation.

*Inflation remains well above the 2% target rate and does not look like coming down much in the foreseeable future.

*Savers have suffered low returns on their capital for over 18 months which is hitting pensioners particularly hard. This would release more spending power into the economy.

* A small rise in rates could actually help confidence in the economy at the moment because it would suggest the B of E at last believes the worst of the financial crisis is finally over.

Rates should remain low but 0.5% is totally inappropriate at the moment.

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As a saver myself I would also like to see some reward for my prudence. However, the MPC must take into account all groups such as the thousands of households that have weathered the storm less well and are still on a knife-edge.

The MPC has therefore rightly viewed the situation in the round and been socially responsible in not pushing things too early which would risk causing those less fortunate to be repossessed.

I'm not a socialist but the idea of getting a slightly better return on my savings at the expense of families being turfed out on the street seems a little extreme.

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Emma Hartley

Aug 16, 2010 at 18:06

Well said Mr Adams!

Unfortunately I do not have any savings as my mortgage and bills leave me with little money, therefore saving is not an option at this stage.

I understand that savers are not benefiting at all by the low interest rate but from economist reports I have read the banks are unlikely to pass on the rates to savers anyway so why wish for a rise and risk hard working people like myself onto the streets?

Higher returns on savings vs. more people on the streets and therefore more people having to claim benefits!

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