Shadow MPC recommends interest rates stay on hold

The Shadow Monetary Policy Committee yesterday voted unanimously for the Bank of England to hold the base rate at its historic low of 0.5 per cent and to leave its quantitative easing programme unchanged.

The Shadow MPC is a partnership between The Yorkshire Post and law firm Lupton Fawcett Denison Till.

The Bank of England’s Monetary Policy Committee will publish its latest decision on interest rates on Thursday.

Members of the Shadow MPC said they did not expect the base rate to move until the New Year although conflict between inflation and wage growth could force earlier action.

There was agreement around the table that there are huge political sensitivities around any rise in interest rates.

Natalie Sykes, regional chairman of the Institute of Directors, said: “You may have young families who need to get onto the next step of the property ladder and can’t, and then you have inflation. It’s going to be quite damaging, so I can’t see it until next year.”

Andrew MacHutchon, of the Federation of Small Businesses, said: “I think the Government’s going to have to play very clever here in terms of timing for this. We might get something in the autumn in the way of an increase. I think they are going to have to be very clever how they pitch it.”

And while the committee acknowledged growing confidence in the strength of the economy they stressed that there remained threats to the recovery.

Alex McWhirter, chief executive of Finance Yorkshire, said: “The important term is ‘relative’. I don’t think it’s by any account a nailed on certainty.

“There are a lot of political issues in the next 12 months, there is instability in Europe and the world generally.”

Businessman David Bagley, of GDBA Pension Fund, added: “They are talking about three per cent growth as the annual growth rate and if that proves to be the case then that’s pretty good because it’s been a while since we have seen that. “Overall, things look great and when you look at unemployment it’s starting to happen but there are a lot of people who are self employed, they can’t find a job so they are working part time or they are doing their own thing and I think that’s masking a lot of unemployment.”

The Bank of England base rate has remained unchanged since March 2009.