BoE maintains base interest rate at 0.1%

The Bank of England (BoE) has confirmed that it will maintain the base interest rate at 0.1%.

The Monetary Policy Committee (MPC) at the BoE, which sets monetary policy to meet the Bank’s 2% inflation target, voted unanimously to maintain the rate in a meeting yesterday.

There had been recent speculation that the Bank may have been considering a move towards negative interest rates, however the MPC indicated that financial markets have “remained resilient” since its previous meeting.

UK GDP is expected to have risen a little in Q4 2020 to a level around 8% lower than in Q4 2019, and the BoE said that GDP is projected to recover rapidly towards pre-COVID levels over the course of 2021. The Bank still warned the outlook for the economy remains “unusually uncertain”.

Commenting on the how the decision may affect savers across the UK, Killik & Co associate investment director, Rachel Winter, said: “Although savers may be relieved that the BoE has decided not to reduce rates even further, they remain in a difficult position.

“Cash savings will not be keeping pace with inflation, and therefore individuals need to think carefully about how much to hold in cash. While a rainy day fund is advisable, any excess cash savings could be invested in order to generate a greater level of return.

“As we remain in lockdown for the time being, it’s a very concerning time for both individuals and British businesses. We’re edging towards a double dip recession, and unemployment figures are rising.

“However, with the vaccine rollout well underway there is optimism ahead, and we hope it won’t be long before businesses can reopen their doors. The continuing low interest rates are intended to boost the economy by encouraging businesses to borrow and discouraging individuals from saving, both of which should raise spending levels and help our economy to recover.”

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