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No changes from Bank of England on rates, QE programme

Bank of England keeps rates at 0.5% today
Bank of England keeps rates at 0.5% today

Six years of British interest rates at the historic low of 0.5% were marked today as the Bank of England once more kept the cost of borrowing on hold. 

The rates have been at the same level since March 2009 when policy-makers took emergency action to stimulate the economy at the height of the financial crisis.

The UK recovery over the last couple of years has brought the prospect of a hike closer.

But with inflation at a record low of 0.3% and expected to turn negative in coming months, there seems little reason for one yet.

Even hawks on the Bank of England's monetary policy committee, who at the end of last year had been voting for a rise, have abandoned their dissent to back the status quo at the last couple of monthly meetings.

It is estimated that UK savers have lost £130 billion as a result of six years of rock-bottom interest rates.

This is the equivalent of £5,000 for every household in the UK, according to financial services firm Hargreaves Lansdown. 

Speculation has been focused on whether the nine-member MPC will choose to hike rates later this year or wait until 2016.

Minutes of last month's meeting showed signs of a three-way split with two members increasingly convinced there should be an increase in 2015 but one viewing a cut as just as likely.

Governor Mark Carney has raised the possibility of rates going down should low inflation persist for longer than expected - though he still expects the next move in Bank policy to be a rate rise.

Low inflation is seen as positive for the economy in the short term but policy makers will not want it to turn into a continuing and damaging spiral of falling prices with consumers putting off spending and firms delaying investment.

MPC members are likely to want to wait for the outcome of pay settlements this spring before deciding whether the threat of prolonged deflation has passed.

Uncertainty over developments in the euro zone economy is also likely to be a factor staying the hand of rate-setters considering a rise.

But they must also look through the short-term impact of factors such as low oil prices to the prospect of inflation rising further down the track as the recovery drives up employment and wage growth - which the Bank sees accelerating this year.

Monthly economic data for February published this week added to hopes that the UK had started the year on the front foot although the pace of growth in the dominant sector edged back slightly.

That comes after the UK's GDP grew by an estimated 2.6% last year, though it slowed more sharply than expected to 0.5% in the last three months.