Bank Rate Decisions 'Good And Bad' For NI

News that the Bank of England's Monetary Policy Committee this week voted to maintain the official bank rate paid on commercial bank reserves at 0.5% has been greeted as a 'curate's egg' by a local economist.

The previous change in the rate was a reduction of 0.5 percentage points to 0.5% on 5 March 2009 and while the Committee also voted on Thursday to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200bn, the most recent change in the size of that programme was a change of £25bn to a total of £200bn on 5 November 2009.

In Belfast, the Northern Bank Chief Economist Angela McGowan commented and said: "This latest announcement is once again bad news for savers but good news for borrowers.

"And with the recent parade of gloomy economic data coming from the UK, it is now looking increasingly likely that the Bank of England will be forced to keep the base rate at this level for the entire year," she said.

"The UK economy is flat lining, confidence is falling and high energy prices are putting even further pressure on household incomes.

"This historically low interest rate level is vital for keeping the UK economy's head above the water when there are harsh austerity cuts all around," she continued noting that, "keeping rates low will most probably weigh further on Sterling, making it 'underperform' against the Euro".

She said that while in Europe interest rates are expected to be raised again in June or July, a weaker pound lends some support to exporters.

"It does of course have negative repercussions for inflation," she said, in counterpoint.

One sector to be going its own way is however that of credit cards where, despite the Bank of England base rate remaining at 0.5% for 25 months the rates on 18 credit cards have increased by between 0.6% and 2%.

This means that the average credit card interest rate has risen to 19.1%, according to analysis by product comparison site moneyfacts.co.uk.

The biggest increases have been introduced by the Bank of Scotland and Halifax, both belonging to the same banking group partially owned by the taxpayer.

Royal Bank of Scotland and NatWest, banks that were also rescued by the taxpayer after the 2008 banking crisis, have also raised some of their credit card rates by 1%.

(BMcC/GK)