BOE continues rate hiatus
(10 March 2010 – UK) The Bank of England kept interest rates at a record low on Thursday, reluctant to jeopardise a fragile economic recovery and hopeful the recent surge in inflation will prove temporary.
According to a poll completed by Reuters last week, 63 out of 64 economists predicted rates would stay at 0.5 percent.
However, with inflation double the central bank's 2 percent target and still rising, most expect a rate rise later this year.
Money markets show a 70 percent chance the BoE will raise rates by a quarter percentage point in May and are fully pricing such a move by the middle of the year.
The European Central Bank, dealing with an inflation rate nearly half the level of Britain's, has already signalled that an interest rate rise in imminent.
Three of Britain's nine-strong Monetary Policy Committee voted to raise interest rates in February, so it would only take two to switch camps to get a majority in favour of higher rates.
The bank gives no statement on its reasons when it keeps rates on hold and minutes from the meeting -- including how the committee voted -- will not be published until later this month.
'With the committee expected to begin tightening over the coming months, and a hike requiring the support of just two more members, UK markets look set to remain jittery,' said Philip Shaw, an economist at Investec.
However, with inflation double the central bank's 2 percent target and still rising, most expect a rate rise later this year.
Money markets show a 70 percent chance the BoE will raise rates by a quarter percentage point in May and are fully pricing such a move by the middle of the year.
The European Central Bank, dealing with an inflation rate nearly half the level of Britain's, has already signalled that an interest rate rise in imminent.
Three of Britain's nine-strong Monetary Policy Committee voted to raise interest rates in February, so it would only take two to switch camps to get a majority in favour of higher rates.
The bank gives no statement on its reasons when it keeps rates on hold and minutes from the meeting -- including how the committee voted -- will not be published until later this month.
'With the committee expected to begin tightening over the coming months, and a hike requiring the support of just two more members, UK markets look set to remain jittery,' said Philip Shaw, an economist at Investec.
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