Today marks the third anniversary of record-low interest rates for the UK.
With the announcement of the decision made at the March 2012 meeting of the Bank of England Monetary Policy Committee (MPC) at midday today (Thursday 8 March 2012), UK interest rates have now been parked at the all-time low level of 0.5% for each successive month since March 2009.
This is the lowest level of interest rates since the foundation of the Bank of England, in 1694.
Have record-low interest rates eased the UK's income squeeze?
The impact of tough economic times on household incomes has been mitigated to some extent by record low interest rates feeding through into some mortgage rates, Bank of England research suggests. The Bank of England says:
The low level of mortgage rates (and so income gearing) may have helped to contain distress. New evidence suggests that forbearance by lenders may also have been important.Chances of an interest rate rise in 2012? Nil
There would appear to be no chance of an interest rate rise during 2012. Recent predictions as regards when the inevitable increase in interest rates might be expected include the following:
- Last week, Bank of England Governor Mervyn King cast doubts on the possibility of an interest rate rise this year or next. King told the Treasury Select Committee: "The yield curve suggests that an increase in bank rate is not fully priced in until mid-2014. But, obviously, if the very real risks I see about inflation do materialise, then it is perfectly possible that the first rise will come earlier than that."
- British Chambers of Commerce (BCC) Chief Economist David Kern says: "We expect official interest rates to remain at 0.5% until the final months of 2013, and then rise modestly to 1.00% in Q2 2014."
- "We expect the Bank of England's interest rates to remain on hold, at 0.5%, until the end of 2013, with only gradual increases thereafter." This is according to the IFS.
- XpertHR economic commentary March 2012: Zigzag recovery or double-dip recession?
- The image used on this page was sourced from Wikimedia Commons.