Today might have marked the start of a new era, as Mark Carney chaired his first meeting of the Monetary Policy Committee (MPC), but the result was all too familiar.
The MPC has decided to leave base rate unchanged at 0.5% for another month and also voted for no additional Quantitative Easing (QE) measures.
The Bank of England has not changed base rate now since March 2009.
In the first meeting of the MPC, since Mark Carney took over as Governor from Mervyn King, the Bank also took the unusual step of issuing a statement, designed to dampen expectations that interest rates might start to rise sooner rather than later.
The statement said: “At its meeting today, the Committee noted that the incoming data over the past couple of months had been broadly consistent with the central outlook for output growth and inflation contained in the May Report. The significant upward movement in market interest rates would, however, weigh on that outlook; in the Committee’s view, the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy.” (Source: Bank of England)
The news will come as a blow to savers, many of whom had been hoping for a rise in interest rates sooner rather than later, as they battle to find a real return on their savings.
Inflation jumping to 2.7% last month and shows no sign of falling. With the Bank predicting it will remain above the 2% target for some time to come. it is now impossible for nearly all savers, including those using a Cash ISA (Individual Savings Account) to get a real return on their savings.
The only option Cash ISA investors have to beat inflation is First Direct’s Cash ISA, which pays a rate of 3.00% AER. However, this is only available for savers with over £40,000 in other Cash ISAs which they could transfer to First Direct.
Non-taxpayers have a couple of options to beat inflation, but all involve tying up savings for a considerable period of time. Whilst basic and higher rate taxpayers currently cannot beat inflation.