Interest rates held but rise on horizon

The Bank of England has announced that interest rates will remain on hold at 0.5%. UK interest rates have remained unchanged since March 2009. However, there were indications from Mark Carney, the governor of the Bank of England, of a hike in the rate in 2016.

The Bank's Monetary Policy Committee (MPC), which sets rates, was split for the first time this year, with eight members voting to keep it unchanged and one calling for a rise — Ian McCafferty voted to increase the Bank Rate by 0.25%.

His view was that demand growth and wage pressures were likely to be greater, and the margin of spare capacity smaller, than embodied in the MPC's collective August projections

All the MPC members are agreed that, given the likely persistence of the headwinds weighing on the economy, when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles.

www.bankofengland.co.uk/publications/Pages/news/2015/008.aspx