Despite repeated speculation from numerous sources, the minutes from the Bank of England’s last meeting of the Monetary Policy Committee (MPC) appear to almost entirely rule out a cutting of the interest rate below the current historically low 0.5%.
The minutes reveal that members of the committee consider it “unlikely to wish to reduce Bank rate in the foreseeable future,” which will come as a relief to savers but means that the interest rates on mortgages won’t be getting another drop either. However, loans and mortgages have already seen large drops on the interest rates payable on them thanks to numerous policies designed to encourage lending, such as the Funding for Lending scheme and Quantitative Easing.
Speaking on Quantitative Easing, the Bank is considering boosting the amount funnelled to the banks by another £25billion, which will take the total to £400billion. It’s a huge figure and one that many people are worried about, but the Bank have launched repeated defences of QE and claim that it does work.
The drop to the interest rate is something that had been thought would encourage both borrowing and investment as savers found that they would no longer be getting decent returns on their money. However, some economists have always thought this was unlikely, such as ScotiaBank’s Alan Clarke, who said it’s “pretty crystal clear that the Bank of England is not going to cut bank rate, which is something that we’ve always believed.”
The revelation means that people can rest easy with their savings accounts, not needing to worry if they will see another big drop in the returns they are getting, but it is also an embarrassing development for the groups and economists that have been repeatedly predicting a drop in the interest rate. Some have been crowing about an impending drop for most of 2012, and this statement from the Bank may be a direct addressing of that issue, trying to silence them once and for all.