Increasing interest rate would 'choke' economic recovery

Date: 4th March 2010

Increasing the rate of interest in the UK would "choke" the country's economic recovery.

This is the view of economy expert Mark Bolsom following the Bank of England's decision to maintain its historically-low base rate of 0.5 per cent.

The decision means the rate has now remained unchanged for 12 consecutive months.

Mr Bolsom, head of the UK trading desk at foreign exchange firm Travelex, said: "We're not surprised by this. I stand by my forecast that the Bank will keep rates at 0.5 per cent until the beginning of 2011 at least, as they will be wary that hiking rates too early would choke economic recovery.

"The Bank is treading a very fine economic line as recovery remains too fragile for them to exercise traditional methods of inflationary control."

Mr Bolsom claimed the Bank can only wait to see what the impact of government fiscal policies is in the next Budget before deciding to make any changes to the rate.