BoE sticks to plan of using low rates to bolster economy

The Bank of England stuck to its plan to nurse the economy back to full health with record low interest rates yesterday, despite a strong recovery and fast-rising house prices which could lead to a split among its policymakers soon.

The Bank’s Monetary Policy Committee (MPC) left its benchmark interest rate at 0.5%, where it has sat since the worst of the financial crisis more than five years ago.

The MPC made no statement after the decision which had been widely expected. Details of how its nine members voted will be released in just under two weeks’ time.

Martin Weale, the MPC member most likely to break ranks and cast a first vote for a rate hike, said last week that borrowing costs should go up sooner rather than later although it was not yet time to start easing the economy off the BoE’s stimulus.

That message of growing urgency contrasts with the view of BoE governor Mark Carney who said last month that Britain’s economy was only edging towards a first interest rate hike, even as growth is expected to top 3% this year.

The BoE thinks there are still enough people out of work or seeking more work to allow the recovery to continue without pushing up inflation.

Forecasts from the Bank published in May showed that gradual interest rate rises starting in about a year’s time would be consistent with its 2% inflation target.