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MPC expected to maintain rates at 0.5%

The Bank of England MPC is this week expected to maintain UK rates at 0.5% despite the fact that Mervyn King has gone public on his concerns about inflation. The Governor of the Bank of England has until now been fairly bullish regarding medium to long-term hopes for the UK economy although last week we saw him take a step back from this optimism amid concerns that inflation is not falling as quickly as the Bank of England had hoped. So what can we expect for the future?

While only a few weeks ago there was little support for an increase in UK base rates, and there is still great resistance to this move, the threat of inflation is becoming more and more prevalent. Over the next few months, despite the fact that some analysts believe UK base rates will remain at 0.5% until 2014, the Bank of England could be faced with some very difficult decisions. Choking the supply of cheap finance in the UK would literally kill the economic recovery stone dead but allowing inflation to run riot in the short to medium term would store up more serious problems for the future.

Who said life at the Bank of England was dull!

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