Interest Rates Remain Unchanged
Minutes from the May meeting of the Monetary Policy Committee revealed a unanimous decision to hold rates at 0.5% where they have been since March 2009.
Two members of the Committee likely to be Martin Weale and Ian McCafferty, who had been voting for an increase to 0.75% in late 2014, felt the decision was finely balanced and are expected to be the first to start voting for an increase.
Inflation has fallen to zero, however policymakers agree that unless oil and commodity prices fall this will be short lived with inflation increasing steadily towards the end of the year.
UK short-term interest rates increased on the month. Based on information from OIS rates: “an increase in Bank Rate to 0.75% was now fully priced in by May 2016, around one quarter earlier than at the time of the April MPC meeting.” A poll of economists taken by Reuters this month showed a median expectation of an increase in Bank Rate in 2016 Q1.
So what does this mean? When Bank Rates do eventually start to move upwards it is likely to be very slowly leaving UK savers and investors in a low interest rate environment for the foreseeable future. Seeking alternative income sources will likely continue to gain in popularity and investing in one or more peer to peer lending platforms will remain a viable option.
Proplend does not provide financial advice. If you need to seek advice, you should consult your independent financial adviser.