BoE Rate UP or no change

twadge_face

On hold innit.

http://www.guardian.co.uk/business/2011/feb/10/interest-rates-held-bank-of-england

Summary: "With the Bank battling to curb inflation, City economists had estimated a 20% chance of a rate increase today, but believe a move is more likely later in the year"

...what do economists know, huh?!

Grauniad wrote:

Homeowners and business organisations breathed a sigh of relief today as the Bank of England kept interest rates unchanged at their record low.

The Bank's monetary policy committee left its base rate at 0.5% for a 23rd consecutive month. With the Bank battling to curb inflation, City economists had estimated a 20% chance of a rate increase today, but they believe a move is more likely later in the year. While money markets have fully priced in a rate rise by May, only 21 out of 67 analysts polled by Reuters think rates will go up before the fourth quarter.

While the economy's recovery from recession stalled at the end of 2010, soaring food, oil and metal prices have been pushing inflation higher. At 3.7%, it is almost twice its 2% target and is set to rise to nearly 5% in coming months.

Interest rates had been stuck at a historic low of 0.5% since March 2009. The last time the Bank raised borrowing costs was in July 2007, by a quarter point to 5.75%. It was criticised for underestimating the financial crisis, already under way then, and was forced to cut rates again in December.

Despite downgrading its economic forecasts this week, the CBI expects rates to start rising this spring and end the year at 1.25%.

The Bank's deputy governor Charles Bean said last week the MPC may be forced to raise borrowing costs if the commodity price boom continues. Last month Martin Weale joined Andrew Sentance, who has voted for higher rates since June, in backing a quarter-point rise.

The economy posted a shock 0.5% contraction in the fourth quarter of last year, which was largely caused by the snow chaos (without it growth would have been flat). Since then, surveys have shown a bounceback in the services, manufacturing and construction industries in January when the weather improved. However, business groups warn the recovery remains sickly.

"While money markets have fully priced in a rate rise by May, only 21 out of 67 analysts polled by Reuters think rates will go up before the fourth quarter."