Interest rates tipped to remain on hold as Bank of England avoids another hike immediately after its first in a decade

The Bank of England is widely expected to keep interest rates on hold this week after raising them for the first time in a decade last month.

The Bank voted 7-2 to increase rates to 0.5 per cent in November in a bid to dampen rising inflation – but with a downbeat picture of the economy painted alongside the move, that is forecast to be the only move for some time.

Despite the Bank saying that two more rate hikes are likely over the next three years in order to return inflation back to its 2 per cent target, many experts believe rates will remain at 0.5 per cent for at least another year.

Ryan Djajasaputra, economist at Investec, said: ‘(The) Bank of England is all but certain to hold fire at its policy meeting on Thursday.

‘We will be looking for any clues over the timing of any future policy tightening in the minutes.’

A further indicator that the Bank is unlikely to raise rates again any time soon comes from the mortgage market, where fixed rates have remained fairly steady since the November hike.

That stability comes after lenders bumped up costs ahead of the interest rate decision, as their funding costs influenced by money market swap rates shifted up in expectation of the hike to 0.5 per cent.

Savers have faced mixed fortunes since the rise, with some banks and building societies choosing to pass on the 0.25 per cent rise to them – but others failing to do so.

Challenger and smaller banks, alongside building societies, were the most likely to pass on the rise. Hardly any savers in popular easy-access accounts or in easy-access cash Isas with Barclays, NatWest, RBS, Lloyds, HSBC, Halifax and Santander have benefited from the full rise

Via: http://www.thisismoney.co.uk/money/news/article-5160473/Interest-rates-held-Bank-avoids-follow-hike.html#ixzz51EK22sgX

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