The Committee also voted to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion.
The Committee reached its decisions in the context of the monetary policy guidance announced alongside the publication of the August 2013 Inflation Report.
Also in the context of that guidance, the Committee agreed to reinvest the £8.1 billion of cash flows associated with the redemption of the March 2014 gilt held in the Asset Purchase Facility.
Barry Naisbitt, Chief Economist at Santander UK, said:
“With the focus very much on forward guidance in the approach to monetary policy, the Monetary Policy Committee was not expected to do anything other than hold Bank Rate again this month. We are now entering the sixth year of Bank Rate being held at its all-time low of 0.50%. The decision was made against a background of continued positive news on economic activity, with the survey indicators of economic activity continuing to show strong readings in February.
"Importantly, the unemployment rate has fallen much faster than the MPC expected back in August and, despite the tick up to 7.2% in December, has rapidly approached the 7% policy threshold, which has lead to a rethinking of forward guidance. At the same time, inflation has fallen back below 2%. This will give some comfort to the MPC in that it supports scope to hold rates at their current level for a while longer.”
Jeremy Duncombe, Director at Legal & General Mortgage Club comments:
“We have now seen five years of incredibly low rates meaning those with mortgages have benefitted from much lower repayments than have been the norm. With the economic recovery now taking hold, it is a question of when interest rates will rise, not if. Now may be the right time to take advice regarding remortgage opportunities, to take advantage of the lower rates which won’t be around for much longer. Our research shows a 0.5% increase in rates can add £750 on to an average mortgage. This is a considerable sum for many families so consumers should be thinking how they will plan their finances.”
