March: The current base rate is 5.25%

March 2008
Rising inflation expectations limit scope for interest rate cuts

The Bank of England's feared scenario came closer when expectations of inflation rose to their highest level since 1999, limiting the scope for interest rate cuts to stimulate the economy.

The central bank's quarterly survey found that people's expectations for the rate of inflation over the next year were 3.3 per cent in February, more than a point above the current official rate and beating the previous high of 3 per cent in November.

The survey also showed people's perception of the current rate of inflation leapt to a record 3.9 per cent from 3.2 percent in November. Official figures showed consumer price inflation at 2.2 per cent in January, continuing a run of above-target rates that started in October.

Mervyn King, the Bank's Governor, has said he is prepared to let short-term spikes in food and energy prices keep inflation above the 2 per cent target as long as expectations of price rises do not become entrenched and start to shape behaviour.

The Bank's Monetary Policy Committee is trying to avoid a sharp slowdown in the economy without cutting rates so far that it unleashes inflation.

Sourced from The Independent

February 2008
Bank of England Holds Interest Rates

The Bank of England held interest rates steady at 5.5% yesterday amid indications that the global credit crisis is easing.

The City had been on tenterhooks as few analysts would have been surprised if the monetary policy committee had cut rates for the second month in a row in response to a slowing economy and a run of gloomy Christmas trading statements from some of the country's leading retailers.

But pundits said it was almost certain the MPC will cut rates next month after it has prepared its quarterly inflation report and has had more time to assess consumer spending.

Just ahead of the MPC's midday announcement came news that London interbank interest rates - the rate at which banks lend to each other - had fallen to 5.63%, a more normal level just above the 5.5% base rate. Interbank rates had been as high as 6.65% a month ago. Yesterday's rate was also the lowest since last summer, before the credit crisis struck in August and brought down Northern Rock.

There are also reports from money markets that banks have begun to lend to each other again. Their reluctance to lend was the key factor behind the credit crunch.

Sourced from The Guardian

December 2007
Bank of England Cuts Interest Rates

The Bank of England today bowed to intense pressure to respond to weaker data from the housing market and the wider economy by delivering the first interest rate cut in more than two years.

The central bank's monetary policy committee trimmed its main lending rate by a quarter of a point to 5.5%, something that will offer relief to homeowners on variable rate mortgages but means lower returns for savers.

The Bank said that while it remain concerned about inflationary pressures, the global credit crunch contained "downside risks" to both output and inflation because it was tightening the flow of credit to both households and businesses.

Until recently the majority of City pundits had expected the MPC to leave rates at a six-year high of 5.75% for the fourth month running because of concerns that rising food and oil prices could push up inflation. But a growing wave of weaker data, culminating yesterday in the third consecutive monthly fall in house prices and a four-and-a-half year low in a key survey of the services sector, on which the economy is now critically dependent, tipped the nine-member committee to vote for cheaper money.

The Halifax immediately announced it would be reducing its borrowing rate by a quarter of a point. Read more below.

Sourced from The Guardian

June: The current base interest rate is 5.5%

June 2007
Interest Rate Continues to Rise
Interest rates continue to rise on their six-year high and show little sign of slowing down. According to the BBC website, many analysts believe that July will see a further rise to 5.75%, with interest rates reaching a peak of 6% by the end of the year.

Sir John Gieve, deputy governor of the Bank of England, has stated that he was one of four rate setters who voted to raise interest rates at the Bank's last meeting.

April 2007
Interest Rate Rise Looms on the Horizon
The Bank of England could lift interest rates as soon as this Thursday, taking borrowing costs to a new six-year high, according to the Daily Telegraph.

City analysts are arguing a run of unexpectedly strong data over the past week had raised the pressure on the Bank's Monetary Policy Committee to consider raising rates to 5.5%, says the Telegraph.

The Bank indicated in its Inflation Report in February a further increase in borrowing costs would be necessary to keep inflation under control, and Governor Mervyn King said last week the situation had not changed. However, most economists think the Bank will wait one more month to see what effect three previous increases have had on the economy, and to give it the opportunity to use an updated set of quarterly inflation forecasts.

Sourced from IFAonline

March 2007
Interest Rate Rise Expected in May

There is a strong chance that interest rates will rise again this year but probably not until May, when the Bank of England has its latest inflation forecasts to hand, a Reuters poll shows.

The poll of 60 economists, taken March 22-23 after data on Thursday showed retail sales staged their biggest monthly jump in two years in February, showed only 11 are expecting UK rates to rise by 25 basis points to 5.5 percent at the April 5 Monetary Policy Committee meeting.

But a hike soon after that is highly likely. Of the 47 economists predicting rates to climb to 5.5 percent by mid-year, 35 said the move would come in May while one other said some time in the second quarter.

Sourced from REUTERS UK

March 2007
House Price Growth Tailing Off

In a speech given on 26th March 2007 to the London Society of Accountants, Sir John Gieve – Deputy Governor – discussed what underlies the City of London’s rapid growth and, therefore, whether it should be expected to continue.

He argued that the economic factors which favour concentration in clusters or hubs in many industries are particularly strong for wholesale finance. The retention of London’s international position in finance long after the UK had lost its leading position in the world economy shows how powerful they are.

Sourced from Bank of England