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Interest rates on hold until after election

The Bank of England’s Monetary Policy Committee (MPC) has delayed the date of its next meeting on interest rates until May 8th, the day after the election.  Its decision on whether to raise rates, or not, will be announced on the 11th of May.

This means that Britain has gone a whole parliament without an increase to interest rates. This is the first time this has happened since the end of the World War 2, when the Bank of England last put official borrowing costs on hold.

Brown and Darling

The rate of 0.5% was set six years ago when the Prime Minister was Gordon Brown and the Chancellor was Alistair Darling.  Going a full parliament without a change in interest rates is not unheard of. Between July 1945 and February 1950, when Clement Attlee was leading the country rates were kept unchanged.

In the history of the Bank of England (which goes all the way back to 1694), interest rates have never consistently been this low. The collapse of Lehman Brothers in September 2008, one of the pivotal moments in the financial crisis, led to the rate being slashed from 5% to 0.5%.

Growing economy

Growth has been steady since 2013, and since then there has been increasing speculation that a rise in interest rates would soon arrive. However, experts and city commentators now believe that a rise is still some time away, possibly in early 2016.

Declining oil prices have led to a fall in inflation, and the cost of living may actually be going down year on year. Low inflationary pressures suggest that policy makers may not feel the need to raise rates as quickly as previously believed. Many commentators believe that rates will remain unchanged until the second quarter of 2016.

BIBBY FINANCIAL SERVICES

As the UK’s leading independent invoice finance specialist and a trusted provider of cashflow funding to over 7,000 businesses, Bibby Financial Services provides a range of finance solutions for companies in over 300 industry sectors.

For more information about Bibby Financial Services’ cashflow solutions, visit: www.bibbyfinancialservices.com or call 0800 91 95 92.

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