The Bank of England is all set to leave the British Interest Rates at an all-time low until next year as stumbling global growth and inflation are not near the expected targets and hence have tied the Central Bank’s hands.
The Central Bank’s rate has been 0.5% since over seven years now and the Bank of England, which was once tipped to be the first major central bank to strengthen and tighten fiscal policy, is not expected to act anytime earlier than early 2017.
Several polls of leading economists have been conducted in this regard and almost all of them have agreed with this assessment.
Earlier in the month of January, close to 50% of the economists believed that the Central Bank will, most likely increase the bank rates which went down to just 20% this month who still believe the Bank of England will increase the federal rate.
Many economic thin tanks have described that the thought that the Central Bank would now increase rates was pure wishful thinking and that the rate hike, given the headwinds that currently lie in front of the UK economy is preposterous.
The British economy is expected to grow at a modest 0.5% per quarter till the next year but the markets are very jittery given the amount of evidence of a slowdown in China which is likely to send shockwaves throughout the world.
Facing insufficient growth, the Central Bank had initially charted a policy with inflation of 2.0% as target, but the prices rose just 0.3% in the past year.
Therefore, a rate hike, if at all there is any, will have to be gradual with the initial basis point of 25 which will have to be followed up closely by matching moves in the second and fourth quarters of next fiscal year,
However, no one expectts any action on this front by the Bank of England, till at least March, next year.