Partly Cloudy

Partly Cloudy

max temp: 21°C

min temp: 14°C

Search

The pigs have arrived. See the latest

Pigs Gone Wild

news here.

Economy: Bank of England leaves interest rates on hold again

12:09 09 January 2014

The Bank of England in London.

The Bank of England in London.

Interest rates remained on hold once more today, marking nearly five years of the cost of borrowing being kept at the record low of 0.5%.

The Bank of England pledged last year not to consider a rise until the unemployment rate falls to 7% as part of efforts to support the UK’s recovery.

Rates have stayed at the rock bottom level of 0.5% since March 2009, while the bank has also pumped £375billion into the economy under its quantitative easing programme to spur on growth.

But the strength of the economic revival in recent months has led to widespread speculation that the bank will have to tweak its forward guidance to stave off a rate hike.

Economists predict that bank governor Mark Carney will lower the unemployment target for considering an increase in the cost of borrowing as early as next month.

When he announced the new forward guidance policy on rates, the bank predicted that unemployment would not fall to 7% until 2016.

But unemployment has been falling faster than expected, down to 7.4% in October, as the recovery gains traction, meaning the threshold could be hit far sooner.

Alan Clarke, of Scotiabank, said unemployment was “falling like a stone”. He added: “We think that 7% will be hit in the early months of 2014. As a result, the bank is likely to modify its forward guidance policy, lowering the threshold to 6.5%, most likely at the February inflation report.”

Brian Hilliard, at Societe Generale, said the threshold could “easily” be reduced below 6.5%.

Despite the bank’s assurances that rates will stay low for some time, the recent pace of recovery has fuelled fears that borrowing costs will have to rise soon.

Economists are forecasting that fourth-quarter 2013 gross domestic product growth at least matched the 0.8% recorded in the previous three months.

Closely-watched survey figures from the services, manufacturing and construction sectors have confirmed that despite a dip in activity last month, the economy enjoyed a strong end to 2014.

But the economy still has some way to go before recovering to pre-financial crisis levels.

Mr Hilliard said the bank’s Monetary Policy Committee (MPC) is not “anywhere near ready to raise rates, given the general state of the economy” and believes rates will remain on hold until the third quarter of 2015.

The recent strength of the pound is also thought likely to increase chances that rates will remain on hold, as it could weigh down on exports by making products more expensive for overseas buyers and damage efforts to rebalance the economy.

Howard Archer, chief economist at IHS Global Insight, said: “Any near-term raising of interest rates could cause sterling to strengthen even more, with damaging repercussions for export prospects.

“Sterling’s strength should help to contain consumer price inflation over the coming months and give inflation a good chance of staying close to its 2% target level for an extended period after dipping to a four-year low of 2.1% in November.”

0 comments

The Trotters Pig

Everyone has a favourite piggy - but which one is it?

Possible views for the new Cornhill in the heart of Ipswich.

A free wifi area could be created in the heart of Ipswich when the Cornhill is rebuilt over the next two years, it has emerged.

Martin Myerscough's Frugalpac cup

A Suffolk entrepreneur could soon be supplying his eco-friendly invention to the world’s largest coffee chain, after grabbing industry attention for his answer to an environmental problem.

Alexander Baxter, owner of gentleman’s accessory firm Baxter & Baxter

A 22-year-old fashion designer who left his day job to build a brand from the ground up has seen his accessories paraded on the red carpet.

A computer-generated image of how the Sizewell complex will look after construction of Sizewell C.

Britain is set to get its first new nuclear power station in generations as EDF’s directors approve investment in Hinkley Point.

Ipswich Hospital

Hundreds of working days were lost at Suffolk’s largest hospital through psychological issues last month, prompting an investigation into the possible link between staff overtime and stress.

The A1071 between Ipswich and Hintlesham.

There was heavy traffic on the A1071 in Hintlesham this evening due to a number of different crashes.

Tess carried a faulty BRCA2 gene, which greatly increases the risk of developing breast and ovarian cancer.

The family of a 24-year-old woman from Ipswich who has died of cancer have paid tribute to her “strength” and “bravery” as she was determined to live life to the full despite the devastating diagnosis.

Beatrix Potter fun day and celebrations at Long Melford Hall. Pictured is Maisey Doyle.

Birthday celebrations including a picnic, party games and a special trail have been held at a Suffolk hall in honour of the famous children’s author Beatrix Potter.

The Aldeburgh Carnival Queen for 2016 has been chosen

Summer wouldn’t be summer without a seaside procession, a great British fete or a laid back music festival - and all of these happen in abundance on the Suffolk Coast.

Most read

Most commented

HOT JOBS

Show Job Lists

Topic pages

Streetlife

Newsletter Sign Up

Great British Life

Great British Life
MyDate24 MyPhotos24