Interest rates freeze continues: but for how long?

Interest rates freeze

Following the Bank of England's latest meeting, interest rates have remained unchanged at 0.5 percent. The move marks the tenth consecutive month that UK interest rates have been left unchanged after a freeze was put in place back in March 2009.

Nonetheless, reports suggest that UK interest rates may well be raised as soon as March, which is likely to lead to economic pressure for the nation. According to analyst predictions, the UK is thought to have exited recession in the last quarter of 2009, which may well be one of the key drivers for the Bank of England to begin speculating that a raise could be on the cards.

However, according to the Bank's Monetary Policy Committee (MPC), the programme of quantitative easing (QE) is expected to continue for just another month, with the scale of the programme then set to be kept under review. What's more, according to reports in British newspaper The Telegraph, leading City economist Simon Ward, of Henderson New Star, reports that, in addition to ending of QE, members of the MPC will begin voting to raise interest rates from as early as next month.

The paper reports that Ward's forecast is based on a range of data including the latest figures on economic activity, inflation and financial market conditions, which combine to help predict what theMPC will do.

He believes that a change in the MPC's stance will first emerge in February when the Bank's next Inflation Report will be published, the paper states.

"No surprise"

In the interim, Ward's peers, which include Philip Shaw, chief economist at Investec, have told reporters that they see "no surprises" in the MPC's announcement today.

He told the BBC, "The environment for the MPC now becomes much more challenging [...] Beyond that the issue will be whether to tighten and if so, when and by how much. It is going to be a very challenging year to be a policy maker."

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