Base rate stays at 0.5%

by Aaron Strutt

May 05 2011

The Bank of England has held the base rate at the historic low of 0.5% for the 27^th consecutive month.

A number of economists commented on what they thought of the decision to thetelegraph.co.uk:

• Philip Shaw, from Investec, is quoted as saying: “In recent weeks, relatively soft UK activity data ... had removed any realistic expectations of a rate hike today. For now we still view an August hike to be the most likely outturn. However we will be tempted to push this back to November or beyond, should the run of activity data continue to disappoint, or indeed if the tone of next week's Inflation Report is more dovish than we expect."

• Graeme Leach, from the Institute of Directors, says:  "Leaving interest rates unchanged is the right decision. The UK economy needs loose monetary policy and tight fiscal policy. Raising interest rates now would risk a contraction in the money supply, a double-dip recession and further undermine the banking system. An easing in fiscal policy and a tightening in monetary policy could result in the worst of all worlds and an even bigger budget deficit."

• Nida Ali, from the Ernst & Young Item Club, says: “The growth outlook has become increasingly uncertain in light of this week's more subdued PMI surveys which point to meagre GDP growth in 2011Q2 as well. Given the weak growth backdrop we could as easily see some of the more hawkish members move back towards the middle ground, as see those in the middle start voting for higher rates."