The Bank of England’s Monetary Policy Committee has kept interest rates unchanged, maintaining the Bank Rate at 0.1% it announced today. Professor Roger Farmer of the Department of Economics comments on this latest decision, made as the UK progresses closer to further lifting of lockdown restrictions.

Professor Roger Farmer said: "Yesterday’s meeting of the MPC did not hold any big surprises. GDP is still substantially lower than prepandemic levels. The committee judged, correctly in my view, that there is considerable spare capacity and that keeping the interest rate on hold at 0.1% is a wise course of action. This benign situation is unlikely to last. As the effects of the recent stimulus takes effect I expect to see additional upward pressure on long bond yields both in the UK and internationally. As the UK exits lockdown there is considerable pent-up demand that will lead to higher prices. That will be fueled by increasing energy costs internationally as a consequence, in part, of the US decision to close down its oil and gas industry. My concern, not apparently shared by the MPC, is that inflationary expectations will start to increase well before we reach full employment."

18 March 2021

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