Few economists would accuse the Bank of England (BoE) of being slow to react to the global economic crises in 2008. Among the major economies in North America and Europe, only the US reacted faster, cutting their base rate below 1% in December 2008, while the UK followed less than three months later. The European Central Bank (ECB) did not follow suit and go below 1% until 2012, more than three years later.
But while the BoE was quick to slash rates to aid an economic recovery, it is very reluctant to increase them and at the time of writing, almost six years after UK base rates were cut to 0.50%, expectations that interest rates will not rise in the near future were boosted by a dovish set of BoE Monetary Policy Committee (MPC) minutes showing that the majority of members are far from convinced by the case for an 'early' increase.
While two members on the BoE's monetary committee continue to vote for an interest rate rise of 0.25%, taking the base rate to 0.75%, there appears little sign that any of the other seven are on the verge of changing their minds.
The two 'dissenters' at the BoE argued that keeping the bank rate low for too long 'risked unbalancing the recovery'. They pointed to the rapid fall in unemployment as a sign that the economy was quickly running out of room for non-inflationary growth and argued that raising rates early would ensure that subsequent rises would be gradual.
Bank Governor Mark Carney hinted in his annual Mansion House speech to City grandees in July that interest rates could begin to rise before the end of this year. But market forecasts have now moved the date of the first rise back to late-2015.