Base rate rise ‘very unlikely’

There is extremely little chance of a base rate hike next week, an economist has argued, something that may come as a relief to those with debt problems.

Next week the Bank of England's Monetary Policy Committee (MPC) meets to discuss the issue of the cost of borrowing and senior economic advisor to the Ernst & Young ITEM Club Andrew Goodwin has claimed the outcome is in little doubt.

He said: "Our view is that the chances of an increase in interest rates next week are little more than zero.

"There are genuine concerns about the weakness of activity and those concerns are likely to win out over any worries about inflation until we see some signs that momentum is beginning to build."

At the same time, talk of there being more quantitative easing is unlikely as the ITEM club does expect growth to pick up later in this year.

Keeping rates low may also aid those fearing repossession if there is an increase in the cost of borrowing soon.

One reason a rate rise may be low is that the staunchest advocate of a hike – Andrew Sentance – is no longer on the MPC.

He began calling for a rate rise last summer and was alone in this view until earlier this year, when Spencer Dale and Martin Weale also started supporting an increase from the 0.5 per cent base rate.

However, Mr Sentence's term on the body ended in May and his replacement Ben Broadbent used his first vote to support the current position, which maintains the record low cost of borrowing.

Posted by Paul Thacker