The Bank of England has announced that UK interest rates will remain at their record low of 0.5%. Alongside this, the Bank’s Monetary Policy Committee (MPC) also left the £375bn quantitative easing stimulus programme unchanged. The MPC said it, “reached its decisions in the context of the monetary policy guidance announced alongside the publication of the August 2013 Inflation Report”.
The policy of forward guidance was first announced in August last year and stated that the Bank would not raise interest rates until the unemployment rate fell to 7% or below. Jobless figures for the three months to November showed that unemployment fell to 7.1%, which in August last year the Bank did not predict would be hit until 2016.Bank of England governor Mark Carney is now under pressure from analysts to use next week’s inflation report to clarify or amend his forward guidance policy. However, in a recent appearance he indicated that he did not want interest rates to rise for some time yet. There is also concern that the decision on interest rates should not just be linked the jobless rate. David Kern, chief economist at the British Chambers of Commerce, said: “Linking forward guidance exclusively to unemployment has proved counter-productive.“Focusing instead on a range of key indicators would increase its effectiveness, reinforce business confidence, and pour cold water on the cynicism that many City analysts have demonstrated.”The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.Setfords Solicitors are a national full service law firm, with business law Solicitors in Oakham and across the country.