Business

UK interest rates remain at record low of 0.5%

Bank of England

UK interest rates have been held at 0.5% again by the Bank of England's Monetary Policy Committee.

Rates have now remained on hold for more than six years and the Bank is not expected to raise them until next year.

Analysts say the Bank is under no pressure to raise rates yet with inflation near record lows.

Inflation, as measured by Consumer Prices Index, was all but flat at 0.1% in May. That was up from -0.1% in April but well below the Bank's 2% target.

However, in the Bank of England's inflation report in May, governor Mark Carney warned that inflation was expected to pick up notably towards the end of the year.

The half-dozen years of ultra-low interest rates have cut returns on savings, but mortgage borrowers have benefited from lower repayments.

Staying put?

The Bank also left its money-printing stimulus programme, known as Quantitative Easing (QE), unchanged at £375bn.

The Bank's Monetary Policy Committee (MPC) will reveal why it decided to leave policy as it is when it publishes the minutes of its meeting on 22 July.

The minutes will also show if any of the nine-strong committee had any strong concerns about economic conditions.

Revised official figures released last week showed the economy grew by 3% in 2014, revised up from an earlier estimate of 2.8%, and by 0.4% in the first quarter of 2015, revised up from 0.3%.

However, the latest forecast from the independent Office for Budget Responsibility (OBR) revised its growth forecasts for 2015 down slightly to 2.4% from 2.5%.

Also on the growth front, recent figures have shown a pick up in pay rises, which are at their highest for almost four years.

Neither statistic though is strong enough on its own when coupled with flat inflation and continuing weak demand from the eurozone.

Chris Williamson, from research firm Markit, said: "No statement was made but, with inflation at just 0.1%, the Bank's inflation target of 2.0% is clearly still a long way off and, with 'Grexit' concerns casting a dark cloud of instability over the economic outlook, now is clearly not the time for central banks to be causing further uncertainty. "

'Indigestion'

From next month, the Bank will release its monetary policy decision and the minutes of the relevant meeting on the same day. When its quarterly inflation report is also due, that will come out too.

As UBS' UK economist, David Tinsley, said: "With all the information coming out at once this may give the market some indigestion at the time of the announcement."

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