The Bank of England base rate is to remain at its historically low rate of 0.5%, at least for the immediate future, the Monetary Policy Committee has announced.
Although the decision was expected, it is not yet sure whether it was unanimous. In both the October and the November meetings, there was a split between the members of the Committee. In both of those meetings, one member voted for quantitative easing measures and another for a rise in interest rates.
The latest Consumer Prices Index showed that inflation reached 3.2% in October, which is well above the 2% target set by the government. Despite this, the majority of MPC members would prefer to see rates kept on hold in order to help the economic recovery.
Andrew Sentance, one of the MPC’s members, has been in favour of interest rates rising to 0.75% since June, whilst in the previous 2 meetings, Adam Posen, voted for quantitative easing measures totalling an additional £50bn.
The BCC has come out in favour of restarting the QE programme as well as keeping interest rates on hold until next year. Chief economist, David Kern, said that despite recent positive news about the economy, the first half of next year will see an increase in the risk of a setback and every effort must be taken to minimise the risk of an economic downturn.
Keeping interest rates on hold may be good news for borrowers but not such good news for umbrella company contractors hoping for better returns on their savings. Although there are a few good deals around, freelancers need to shop around to make sure their savings are working for them and not against.
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Image: Tiny endemic. by Nuytsia@Tas
