UK interest rates held at 5% (XpertHR - Employment Intelligence)

UK interest rates held at 5%

The Bank of England's Monetary Policy Committee (MPC) announced (external website) at midday today its decision to hold UK interest rates at 5% for a fifth successive month.

It remains to be seen how the MPC's decision will affect inflation (subscription required), and how this in turn will feed through into pay awards. As noted in our latest monthly analysis of pay settlements (subscription required), the median award currently stands at 3.2%, some 1.4 percentage points below the headline rate of retail price inflation (RPI), currently 4.6%.

This is the widest such gap since the closing days of the Thatcher government, back in October 1990. Let us hope Mr Brown doesn't ruin his holiday while browsing this fact by laptop or other modern technological contraption on the beaches of Southwold (external website).

The MPC's announcement held little in the way of surprises for most economic commentators, including the Institute of Economic Affairs' Shadow Monetary Policy Committee.

It also follows hot on the heels of the US Federal Reserve Bank's decision (external website) on Tuesday to hold rates at 2%.

If your organisation has recently settled its annual pay award, and you would like to contribute to our monthly analysis of pay trends, you can submit details of your organisation's latest settlement for inclusion in the IRS pay databank by completing the online form.

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Posted by Michael Carty
on August 7, 2008 12:00 PM

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