Posted on: Wednesday, December 14, 2016
The Bank of England decided unanimously to hold the base rate at 0.25% in November, despite suggestions back in August that a further rate cut was possible.
Following Britain’s vote to leave the European Union back in June, economic activity was widely expected to weaken.
This could have triggered a further cut in rates.
However, markets have proved resilient, and economic growth has been higher than expected. The more positive economic outlook means rates are on hold for now.
A change in rates has not been ruled out though. The Monetary Policy Committee, which sets interest rates, indicated that they would move rates in either direction to respond to changes in economic outlook.
Factors which could affect their decision include rising inflation, or the cost of living, and the impact of Brexit.
According to the Bank of England, inflation is set to increase sharply next year. If it exceeds the Government’s 2% target, the Monetary Policy Committee may decide to raise the base rate.
However, if Britain’s negotiations over how we will leave the EU affect business activity and supply growth, this could lead to a cut in rates.