UK interest rates static at 0.5% in June 2009, and likely to remain so until 2010

In line with what has now become a standard pattern over the last few months, the Bank of England’s Monetary Policy Committee (MPC) announced at midday today that June 2009 will see UK interest rates once again held at their current all-time low of 0.5% (external website). And it would seem very unlikely that we will see any deviation from this pattern until some time in 2010.

The latest biannual analysis of the UK economic outlook (subscription required) from pay specialists at Industrial Relations Services (IRS), newly published to XpertHR, notes that the MPC will be keeping a close eye on inflation, looking for signs of upward movement in inflation before interest rates follow suit. According to IRS:

The consensus is that both inflation measures [consumer prices index (CPI) inflation and retail prices index (RPI) inflation] will continue to fall throughout the year. RPI inflation is not expected to record an increase in prices until 2010. It is then expected to increase fairly rapidly. A large part of the current fall in RPI is attributable to the fall in mortgage interest payments, as the MPC reduced interest rates from 5% in September 2008, to 0.5% in May 2009. However, its cycle of rate-cutting is over, and the next move – predicted to be in 2010 – will be upwards, taking mortgage interest payments, and inflation, with it.