The Bank of England’s monetary policy committee (MPC) today left interest rates on hold at their record low of 0.25 per cent but said a further cut could come later this year.
Announcing the unanimous decision by the nine-strong committee to keep the base rate unchanged, the Bank said news on the near-term momentum of the UK economy had been “slightly to the upside” compared with the projections contained in last month’s inflation report, which coincided with the MPC’s first cut in borrowing costs in seven years.
Although inflation as measured by the consumer prices index (CPI) remained at 0.6 per cent in August – well below the Bank’s 2 per cent target – it said inflation is expected to rise towards that level in the first half of next year.
Depending on the outlook for the economy during its November forecast round, the MPC said: “A majority of members expect to support a further cut in bank rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of this year. The MPC currently judges this bound to be close to, but a little above, zero.”
However, British Chambers of Commerce head of economics Suren Thiru said: “With UK interest rates already close to zero, further cuts will do little to stimulate growth and are likely to exacerbate the cost pressures that both businesses and consumers may face in the coming months from a weakening currency.
“With the monetary policy tools at the MPC’s disposal largely exhausted, it is vital that the government uses the upcoming Autumn Statement to deliver a fiscal environment that supports confidence and incentivises businesses to invest.”