Bank of England holds rates at record low

Rates held at 0.5% and £375 billion economy-boosting drive unchanged

The Bank of England kept interest rates on hold once more today amid renewed speculation that it may be forced to raise the cost of borrowing sooner than expected.

Policymakers maintained rates at their record low of 0.5% and kept the Bank's £375 billion economy-boosting drive unchanged.

But the strength of Britain's recovery is raising the prospect of a rate hike in 2015 - a year earlier than the Bank first predicted under its new forward guidance policy.

Experts believe the Bank will need to make significant revisions to its unemployment forecasts as UK growth gathers pace.

Calls are also growing among some economists to raise rates now in the face of surging growth and a buoyant housing market.

UK growth picked up to 0.8% in the third quarter and minutes of the Monetary Policy Committee's (MPC) October meeting showed unemployment was falling and the economy recovering faster than it forecast.

A hat-trick of positive industry surveys in recent days has added to the rosy economic picture, suggesting growth has continued into October across manufacturing, construction and services sectors.

Attention is already turning to the Bank's inflation report next week and expectations for governor Mark Carney's forward guidance to come under further pressure.

Under the Bank's rates pledge, it said it would not consider a rise until unemployment falls from 7.7% currently to 7% - a threshold it said would not be reached until the end of 2016 in its August inflation report.

Financial markets have remained unconvinced and are pencilling in a rise in early 2015.

Alan Clarke, economist at Scotiabank, said the Bank may now be forced to shift its own forecast by as much as 18 months as the recovery gains traction.

Think tank the National Institute of Economic and Social Research (NIESR) said earlier this week that rates could rise as soon as the second half of 2015 in a blow to Mr Carney's policy, after he sought to reassure households and businesses that rates will be on hold for at least three years.

But NIESR's latest forecast on the economy suggested a slight easing in growth to 0.7% in the three months to the end of October.

While most experts believe the Bank is right to hold rates until the recovery is firmly entrenched, some say rates should be raised by 0.25%.

Sir Steve Robson, the former second permanent secretary to the Treasury, and Andrew Sentance, senior economic adviser to PricewaterhouseCoopers and previously a member of the MPC, are among those who think rates should go up to 0.75% to start reining in ultra loose monetary policy.

The recovery prospects also mean the Bank's quantitative easing (QE) policy is set to remain on hold for some time.

America maintained its QE programme at full throttle last week, but the market fretted that comments in the Federal Reserve's statement suggested the door was left open to possible tapering in December or January.

PA

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum