Inflation rates kept on hold at 5.25%

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by Kay Murchie

The Bank of England’s Monetary Policy Committee (MPC) has decided today to keep interest rates on hold today at 5.25%. The decision was in line with market expectations.

Its decision to keep interest rates on hold is believed to be a way of curbing further increases in inflation.

Interest rates were cut from 5.5% to 5.25% in February in order to prevent what looked like becoming a slump in the economy. The February cut followed the 0.25% in December.

Homeowners and prospective home buyers will have undoubtedly been hoping for a further reduction. However, the news is good for savers as payouts on savings have risen 1.2% compared with January 2007 payouts, according to MoneyExpert.com.

Sean Gardner of MoneyExpert.com said average rates on savings have rocketed as finance firms try to raise cash after the money markets seized up. If you have a savings account that pays less than the base rate you should take your business elsewhere.

Andrew Montlake at Cobalt Capital said a reduction would have been a welcome boost for homeowners, in particular first-time buyers and would have helped offset the rises in tracker rates, which have been occurring regularly over the last few weeks as lenders fight to increase their margins.

Many experts predict further interest rate cuts in the spring.