UK interest rates cut to 0.25%

Current UK interest rates

UK interest rates have been held at 0.5% again by the Bank of England.

The Bank also kept the size of its bond-buying stimulus programme unchanged at £375bn.

The decision by the Bank's Monetary Policy Committee (MPC) comes more than six years after the record low was introduced.

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

Last month, the Bank indicated in its quarterly inflation report that it was likely to raise the cost of borrowing in the middle of next year.

Meanwhile, recent ONS figures confirmed that UK gross domestic product (GDP) growth slowed to 0.3% in the first quarter, which was its worst showing since the end of 2012.

The nine-strong MPC has voted unanimously to keep rates on hold in all its previous meetings so far this year.

'Underlying strengths'

Howard Archer, chief economist at IHS Global Insight, said: "The Bank of England was always a nailed-on certainty to keep interest rates at 0.5%. Indeed, the odds currently strongly favour the Bank of England sitting tight on interest rates (and on the stock of quantitative easing) over the rest of 2015."

He added: "We expect the Bank of England to start edging interest rates up in the first half of 2016.

"Current robust consumer activity and signs that housing market activity is picking up suggest that an interest rate hike early on in 2016 is becoming increasingly likely, although the softer set of purchasing managers surveys for May fuel uncertainty over the economy's current underlying strength.

"Much will clearly depend on how economic growth, earnings and productivity develop over the coming months, as well as just how quickly inflation moves up later on this year."

And the British Chambers of Commerce (BCC) said the MPC had made the "right decision" to keep interest rates and quantitative easing on hold.

BCC chief economist David Kern said: "Annual inflation has fallen marginally into negative territory over the past month, raising interest rates in real terms.

"And while inflation will edge up later on this year, it will stay below the Bank of England's 2% target for the next 12 to 18 months, reinforcing the case for maintaining interest rates for the time being."

Source: www.bbc.com
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