No change in interest rates for March

Following the latest Monetary Policy Committee meeting last week the Bank of England has decided to keep interest rates on hold amidst concerns over rising inflation. Although there have been calls for the central bank to cut rates as a result of the flagging economy officials have also had to take into consideration the risks of rising inflation as well as a slowing economy.

Interest rates have already been cut twice since December, with two 0.25% cuts taking the base rate from 5.75% to 5.25%. Many economists had predicted a 50-50 chance of a further rate cut in March, but the decision to keep rates on hold came as no big surprise to most. However, with consumer confidence, house prices, and the economy all continuing to suffer it is thought that there will be at least one more rate cut before the summer.

One industry official stated: “We expect the next move to come in May, in line with the consensus view, and see Bank Rate falling to a low of 4.5 percent by the end of this year.”

Another industry official said that the news was good for savers but not for borrowers hoping to see a reduction in the cost of borrowing.

He said: “Despite interest rates being the same now as they were in January 2007, banks have shifted their prices considerably over that period. The real losers are customers who are not aware of how the market has changed. If you have a savings account that pays less than the base rate you should take your business elsewhere, and fast. Banks aren’t bothered about showing loyalty to their customers so don’t worry about showing loyalty to yours.”

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