No good news for the pound: Interest rates are signalled to remain at record lows
Jennie Watkin examines the recent news from the UK’s central bank.
Voting 8-1 today, the Bank of England, the United Kingdom’s central bank, has voted to keep interest rates at record low levels, leaving them at the same level for going on 7 years now.
The low inflation rates has, as the Bank explained in recent times provided further stability and confidence, with the low rates also contributing to real income growth, helping to make families feel better off.
James Sproule, of the Institute of Directors (IoD), told the Telegraph that “caution won out again at the Bank of England today, with the Monetary Policy Committee spooked by a worsening outlook for global growth…but, with strong consumer confidence and wages on the up, the arguments against raising interest rates from the current exceptionally low level are falling away”. It must be noted that the IoD has been trying to have the Bank of England, and by extension, the government, normalise rates for a while now.
Contrary to the reports and beliefs of the IoD, Mark Carney signalled that, if needed, rates could be cut to sub-zero levels, if required by the economy. What’s more, the use of fiscal consolidation, being deployed by the Government, has also been factored in to their calculations, so the rates may remain low for quite a while, or even cut further if the budget cuts continue.
caution won out again at the Bank of England today, with the Monetary Policy Committee spooked by a worsening outlook for global growth
On the 6th of May 1997, following the 1997 general election which brought a Labour government to power for the first time since 1979, it was announced by the then Chancellor of the Exchequer, Gordon Brown, that the Bank would be granted operational independence over monetary policy. This meant that whilst the government maintained fiscal autonomy, the bank would be able to decide interest rates, that effect the entire banking system for both firms and individuals.
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