Bank of England Holds Interest rates for 16th consecutive month

UK interest rates have been held steady at 0.5% for the 16th consecutive month. Additionally, the Bank of England Monetary Policy Committee decided not to inject any more money into the economy under its policy of quantitative easing.

The decision not increase interest rates had been expected but last month committee member Andrew Sentance called for rates tobe increased to 0.75% over inflation concers, arguing that the increase was needed to keep the rising inflation rate in check.

Inflation rose to a 17-month high of 3.7% in April, falling back to 3.4% in May and currently remains well above the Bank's 2% target.

It is believed that the planned VAT increased will further increase inflation and the pressure for rates to rise accordingly: VAT is scheduled to rise from 17.5% to 20% on 4 January, 2011.

However, experts from the housing industry do not expect interest rates to rise at least until next year and even then predict a very slow rise.

For more on this topic:  http://www.bankofengland.co.uk/monetarypolicy/decisions.htm