Bank Of England Keeps Interest Rate Unchanged

Like most central banks, the Bank of England is independent of the national government and plays a critical role in determining interest rate policy which can affect inflation and the money supply to the business community.

There has been nearly rabid speculation about when the US Federal Reserve will increase its interest rate from its near zero value ever since the Fed ended the Taper. This has been credited, in some quarters, with supplying much of the Bull Run energy that the Dollar has enjoyed since even a modest rate rise would bolster the Dollar against other major currencies, such is the power of the US economy and the importance of the Dollar as the de facto world currency. However, the same cannot be said over the deliberations of the Monetary Policy Committee (MPC) of the Bank of England.

UK interest rates have been sitting at the historic low figure of 0.5% since March 2009 – before the current UK coalition government came to power. Arguably, the UK economy has seen the strongest growth of any major (democratic) economy, in recent quarters. The UK ranks as fifth largest economy globally, in terms of GDP. Yet there is little speculation about when the Bank of England will raise rates. The most recent meeting of the MPC decided to keep rates on hold.

Owing largely to the deflationary effect of the tumbling crude oil price on energy and transport costs, coupled with moribund global demand, inflation in the UK is at zero. A rate rise would likely lead to a surge in the value of the Pound, exacerbating problems that British industry is already beginning to feel in trading with its biggest partner, the Eurozone. The Euro fell by nearly 7% against Sterling during the first quarter of 2015. It remains under pressure because of uncertainties about Greece’s future within the single currency and because of the accommodative monetary stance taken by ECB which sees it buying €60 billion worth of bonds on a monthly basis until September 2016.

Dr. Mike Campbell
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.