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Bank of England to announce UK rate decision this morning

The Bank of England is today set to announce this month's decision on UK base rates with analysts certain that rates will remain at 0.5%. Despite the fact that we have seen signs of life in the UK economy over the last few weeks there is a concern that potential unforeseen financial situations in the short term could derail the recovery. As a consequence, with liquidity in the banking sector still relatively low, the Bank of England is unlikely to increase base rates which would have a detrimental impact on mortgage rates, loan rates and credit card rates.

The government and the Bank of England have been attempting to increase liquidity in the UK consumer and the UK business arena for many months now. Indeed even a legally binding agreement with Lloyds bank and Royal Bank of Scotland regarding liquidity levels failed to hit targets but there is very little that the government can do to penalise these companies. It will be interesting to see the comments from the Bank of England regarding the UK economy, inflation and the immediate future because Mervyn King, the governor of the Bank of England, has become slightly more bearish over the last few weeks.

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