The Bank of England’s Monetary Policy Committee (MPC) has held Base Rate at 0.5%.
Base Rate has now stood at this record low for more than five years.
The minutes of last month’s MPC meeting revealed that, while the vote to keep Base Rate at 0.5% was unanimous, the case for an increase is gathering momentum.
As the minutes state: “The Committee agreed that no increase was warranted at this meeting, although for some members the decision had become more balanced in the past few months than earlier in the year.”
The minutes highlight the strengthening argument that a small rise in Base Rate is unlikely to ‘derail’ the economy’s improving state. It also points out that there is a case for increasing Base Rate while the economy is growing to allow the MPC to “evaluate the sensitivity of households, firms and financial markets to changes in interest rates” after such a long period where Base Rate has been unchanged.
In other words, a rate rise is coming. The markets have priced an increase to 0.75% by the first quarter of next year, while 40% of economists polled by Reuters last month expected the first rise to take place in February 2015.
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