The Bank of England has announced that interest rates will remain at the record low of 0.5 per cent.
Rates have remained at their lowest level for the past five years and there has been suggestion that they could increase as the economy recovers. The Bank's decision follows a split from the Monetary Policy Committee (MPC) on whether or not rates should be raised. Two members voted in favour of a 0.25 per cent increase to 0.75 per cent, according to the minutes of the August 6th and 7th meeting.
Ian McCafferty and Martin Weale supported a raise in rates but were outvoted 7-2, it marked the first time the MPC was split on interest rates since July 2011. However, the Bank has decided to keep rates at 0.5 per cent continuing their record low which was originally introduced in March 2009.
Bank governor Mark Carney has warned that the rates could rise in the near future. Mr Carney said that any rise would be small and gradual making it manageable for companies and consumers alike. Analysts believe that an interest rate increase will come by the end of 2014 as a rise in 2015 would be too close to the May general election.
Philip Shaw, Investec chief economist, said: "In any event the issue is that there is typically a preference, if possible, to avoid monetary policy becoming a political football in an election campaign. Indeed it is relatively rare for rates to rise before general elections, and if they do, the moves tend to come some time in advance."
There are still concerns regarding the slow growth of wages which would be affected should the Bank decide to increase rates. Introducing the hike too soon could hamper both businesses and individuals alike, according to analysts.
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