Interest rates stay on hold

Steady inflation has reduced demand for a rise in rates short term
Steady inflation has reduced demand for a rise in rates short term

Interest rates have been left on hold at 0.5 per cent once again as the Bank of England delivered its latest policy decision, a day after Chancellor George Osborne’s emergency summer Budget.

Rates have remained unchanged for more than six years and are not expected to rise until next year.

The Bank’s Monetary Policy Committee (MPC) is likely to have weighed up developments such as accelerating wage rises and upward revisions to UK growth against fears over Greece and disappointing manufacturing figures.

The decision also saw the Bank leave the scale of its money-printing quantitative easing (QE) programme unchanged at £375 billion.

Details of the MPC’s discussions, to be published on July 22, will reveal whether the nine-strong committee remained unanimous on leaving rates on hold or if any broke ranks to vote for a hike.

The pressure for any imminent need for a rate rise has been removed by the fact that inflation remains near historic lows, at 0.1 per cent, well below the Bank’s two per cent target.

But the committee must also consider the path that inflation is likely to take over the next couple of years.

So-called “hawks” - more likely to be in favour of an interest rate hike sooner - will have been encouraged by latest wage data showing annual pay rises climbing to their highest rate for nearly four years.

Revised official figures last week also showed the economy grew by three per cent in 2014, up from 2.8 per cent, and by 0.4 per cent in the first quarter of 2015, up from 0.3 per cent - another factor that could be seen as putting upward pressure on prices.