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When will UK base rates begin to rise?

UK base rates were today frozen at 0.5% by the Bank of England MPC, a move which was fully expected by analysts in the UK. However, many savers in the UK are struggling to survive on their vastly reduced incomes from their savings pots and wondering when the UK base rates will rise and when savings income will return to anywhere near "normal levels".

The truth is that the UK economy, while making good progress of late, is still in the very early stages of a complete recovery from the recession. Even though growth in GDP was revised higher for the fourth quarter of 2009, from 0.1% to 0.3%, it is not certain that the UK economy is firmly back on the growth track. If the authorities take away too many of the supports introduced over the last few months we could see UK economic activity start to slow, something which would be very difficult to turn around quickly.

While the vast amounts of money thrown into the UK system have obviously had an impact in the short term the real test will come with regards to consumer and business confidence in the UK economy. Only when consumers start to spend and businesses start to invest will we see firm foundations appearing, the cornerstone of any economic recovery.

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