UK rates mark six years at 0.5%

Written By Unknown on Kamis, 05 Maret 2015 | 19.12

5 March 2015 Last updated at 12:00

UK interest rates have been kept unchanged again by the Bank of England, meaning they have now been at their record low of 0.5% for six years.

Rates were first cut to 0.5% in March 2009 as the Bank sought to lift economic growth amid the credit crunch.

Recent growth in the economy has prompted speculation that rates will start to rise again in the near future.

However, continuing low inflation, now at 0.3%, gives policymakers little reason to raise the cost of borrowing.

Inflation is expected to remain low, and could even turn negative, thanks largely to a near-halving of the price of energy.

Bank of England governor Mark Carney has even talked about lowering interest rates further to a new record low, should prices remain near flat for longer than expected.

However, Mr Carney has said prices are likely to rebound around the turn of the year.

Most developed economies are used to prices rising. The fear is that if prices do start to fall, consumers will put off buying goods in the hope of further price falls.

With the economy around 70% dependent on consumer spending, any slow down could have a harsh impact on overall economic growth.

Martin Beck, senior economic adviser to the EY Item Club, said the next rate rise could be almost a year away.

"While the risks of an earlier rate rise have probably increased lately, we still think it most likely that the Bank will wait until February 2016, by which time inflation will be back above 1% and heading towards the 2% target."


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