Interest rates likely to remain unchanged

Date: 6th September 2010

Small businesses have been told that interest rates are likely to remain at on hold for the 18th month in a row this week.

The Bank of England's Monetary Policy Committee (MPC) is set to deliver a decision this Thursday (September 8th) on whether or not to change the current Bank Base Rate of 0.5 per cent.

Analysts believe that the MPC is likely to leave the rate unchanged as it seeks to ensure the continuation of the economic recovery, which it has so far prioritised over the need to rein in high inflation rates.

"There is little doubt that the Bank of England will keep interest rates at 0.50 per cent for the 18th successive month," said Howard Archer of IHS Global Insight.

"The Bank of England continues to tread a difficult policy path as it faces still-muted overall economic recovery following deep recession, significant growth headwinds, and persistent above-target inflation."

He predicted that interest rates will remain at 0.5 per cent through the first half of 2011 and that when they do start to rise, it will be gradual.

Recent Office for National Statistics figures reported that the UK's GDP rose by 1.2 per cent in the second quarter of 2010, but experts believe this rate of growth is unlikely to be maintained.

Posted by Jacob Williams