The Bank of England won't cut interest rates any time soon according to a newly-released document, which means similar reductions to loan rates are also unlikely.
The Bank of England's Monetary Policy Committee (MPC) voted by eight members to one to keep interest rates at five per cent this month, newly-released minutes reveal. A rate cut of 0.25 per cent for May was supported by economist David Blanchflower according to the document.
Reductions to the base rate of interest are generally mirrored by drops in personal loan and mortgage repayment rates, and are therefore administered in times of economic slowdown as a stimulation to spending.
The Bank held off on the reduction, however, due to concerns over rising inflation, a trend which is generally exacerbated by rate cuts. The government's own benchmark, the CPI, showed a full half a point inflation rise over the past month to three per cent.
According to the minutes, the fact that the Bank's governor is obliged to write a letter to the chancellor explaining why inflation is so high when it reaches three per cent remains a big concern for the MPC. "With inflation set to move into letter-writing territory in the next month or two, the next cut looks unlikely to come for a few months unless the activity [ie, economic growth] news is absolutely dreadful," they commented.
Figures released earlier this week from MoneyExpert.com showed that personal loan rates have crept up by as much as a full percentage point over recent months, a trend which the financial website blamed on the economic slowdown.
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