Over the past eight months a series of base rate cuts by the Bank of England have seen the base interest rate plummet to its lowest level in the three hundred and fifteen year history of the Bank of England, standing at just 0.5 percent. According to recent reports many industry experts are now expecting the base interest rate to remain at this historic low level well into the course of next year.

The report claims that the central bank has dropped hints that the base rate will remain at 0.5 percent well into 2010, and that it will then start to rise but the increases will be very gradual. The Bank of England has predicted that inflation will remain below target for some time to come, and this means that the need to increase rates before next year will be unlikely. Inflation is set to fall below the government’s 2 percent target and is expected to remain at that level for the medium term, according to the report.

One financial expert said: ‘The Bank of England are not buying the “it’s all over” mood that seems to be sweeping over investors and market pundits. The key phrase in their latest inflation report was “It is more likely than not, that CPI inflation will be below the 2% target in the medium term”, which indicates that there will be no end to the current policy of credit easing any time soon, and that rates will be kept low for the foreseeable future.’

Another industry official added: ‘The message here is that they are going to be in no hurry at all to start to tighten policy, whether that is through a reversal of QE or higher interest rates. The other point is that they are still expecting inflation to remain well below target even when the economy has recovered because of the amount of spare capacity in the economy.’

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