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MPC minutes reinforce belief that record low base rates are set to be held until next year

EXPECTATIONS that UK base rates will remain on hold until next year have been reinforced by minutes of the latest meeting of the Bank of England's Monetary Policy Committee.

The minutes of the March 5 and 6 meeting, published yesterday, signal no-one on the nine-strong MPC is in a hurry to start pushing base rates up from their record low of 0.5%. And MPC members were again unanimous in voting to hold base rates and maintain the scale of their quantitative easing programme at £375 billion.

Committee members noted sterling's recent rise could dampen inflation.

And the minutes highlight the unbalanced nature of the UK economic recovery.

Detailing MPC members' discussions on this issue, the minutes state: "There were initial signs that the anticipated broadening from household to business spending might have already begun. Even so, there remained some way to go to ensure that the recovery was both balanced and sustainable."

Samuel Tombs, UK economist at consultancy Capital Economics, said: "The outlook for interest rates is clouded somewhat by the fact that three of the current nine MPC members are set to be replaced in the summer. But for now, we continue to think that the prospect of a prolonged period of below-target inflation will mean that the MPC keeps interest rates on hold until late 2015."

Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "The minutes of the March MPC meeting do little to dilute the view that the second quarter of 2015 is currently the prime candidate for when the Bank of England starts to inch interest rates up. This has been the impression given by the inflation forecasts contained in the Bank of England's February quarterly inflation report and also by the general tone of recent comments made by MPC members."

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