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MPC Decision to Leave Bank Rate at Historic Low Reflection of Global Economy

MPC Decision to Leave Bank Rate at Historic Low Reflection of Global Economy

The latest meeting of the MPC or Monetary Policy Committee left the low bank rate of 0.5% right where it sits, with no clear indication of when it might be under review for an increase. The rate has been at the same level for almost six years now and anyone involved in housing purchases continues to benefit. Two members of the Bank of England MPC had been voting to raise the rate in recent meetings. But this meeting brought out different opinions and therefore different voting stances by the two, Martin Weale and Ian McCafferty.

The Bank of England MPC met earlier this month with new economic data ruling the country and new opinions about how to control the inflation rate, among other things. The vote to keep the bank rate at 0.5% was unanimous, as all nine members of the MPC decided to keep the rate at the same level.

The reasons to keep the bank rate at the low level were clear. The inflation level fell to 0.5% last month, which is the lowest level of inflation in almost 15 years. The goal of the Bank of England for inflation is 2.0%. MPC members felt raising the rate could lead to possible issues surrounding inflation and it getting out of control.

The second reason the bank rate was left at the historic low level was due to the latest news about the global economy. Many fundamental pieces of data concerning the current state of the economy around the world point to a massive slowing of growth.

Alastair McCaig, a market analyst for IG, commented on the bank rate, saying: "Any expectation that rates might rise in 2015 has now been quashed.”

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