The Bank of England’s Monetary Policy Committee (MPC) decided today to once again hold interest rates at 0.5%. The decision comes as the Consumer Price Index measure of inflation remains stubbornly high above the Bank of England target rate of 2%.
Value Added Tax is set to increase to 20% in the new year and concerns are growing that the UK economy may not have as much spare capacity as was previously thought. The MPC meeting minutes are increasingly illustrating the dilemma that monetary policy makers are faced with as these pressures grow.
For now it is reassuring to know that the MPC is erring on the side of caution and ensuring that business activity, and therefore economic demand is stimulated with ultra low interest rates.
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