Pressure is on Bank to raise interest rates

The Bank of England is expected to announce today that interest rates will stay at 0.5 per cent for the 23rd consecutive month. This is despite intense speculation that the Bank will bow to pressure and raise rates.

Melanie Bien, director of Private Finance, says: ‘Although two members of the Monetary Policy Committee voted in favour of an immediate rate rise to 0.75 per cent last month, in our opinion it is still too early to take the plunge. The economic recovery is so weak, as the gross domestic product (GDP) figures for the fourth quarter showed, with a negative reading.

‘Inflation may be well above the government’s 2 per cent target, and look as though it will break the 5 per cent barrier, but there are still too many risks associated with increasing interest rates. There is also a debate as to whether raising rates would have any impact on inflation anyway.

‘If rates rose sharply, many homeowners could struggle to pay their mortgages and risk losing their homes.’

For more information on interest-rate movements and how you could protect yourself, contact Private Finance.