It’s understandable that the Bank of England want to wait and see how the recovery is shaping up after the disastrous shrink in Q4. And bearing in mind that we will see quite significant public spending cuts starting to kick in from Q2, I think it’s probably the right decision for them to wait and see that the economy is on a stronger footing before they tighten monetary policy.
So when will we know, then, Emily, and what do you expect the verdict to be?
Well, the decision’s announced at mid-day today and we note in June last year one member of the nine-man MPC voted for a rise. Last month, that rose to three supporting a rise; now they need five members to say yes before rates go up. The general feeling is that they will still hold this month. We haven’t had any figures yet on growth for the first quarter and Q4’s of last year showed the economy contracting. And Mervyn King, the governor of the Bank of England, has himself played down any need for a rise. So I think the signs are that there has to be some evidence that the economy is through the worst of it before the bank decides to raise rates again.