The Bank of England held the base interest rate at 0.5 per cent last week, providing relief to many UK households already struggling with their finances.
In sharp contrast to overwhelming expectations a few weeks ago that they would raise rates, Bank of England policymakers voted 7-2 to keep them at 0.5 percent.
The Bank stated that it wanted to be confident that the economy was getting over the slow start to 2018 before the base interest rate was moved upwards.
Bank Governor Mark Carney commented: ‘What?s the sensible thing to do? Do you act now or do you wait to see evidence that that momentum is reasserting. The judgment of the majority of the committee is you wait to see for some evidence of that reasserting.’
However, he said that the Bank of England was continuing with the message that rates would probably need to rise – for only the second time in over a decade – once that recovery was clear.
He also later confirmed on the BBC that interest rates were likely to rise by the end of this year.
The Bank of England also downgraded growth forecasts, saying the economy would grow by 1.4 per cent this year, down from the 1.8 per cent it predicted in February, with slowing consumer lending and a sluggish housing market creating greater-than-usual uncertainty about consumer demand.
Further growth for 2019 and 2020 was predicted to be 1.7 per cent, down from 1.8 per cent in its February forecasts.
Inflation was predicted dropping to 2.1 per cent in a year?s time, and returning to target a year later, but only if interest rates rose by 25 basis points about three times over three years.
The bank still sees a need for increases in the base rate to ensure that the economy does not overheat due to long-term weak productivity and lower immigration driven by Brexit.
However, for now consumers can breathe a sigh of relief that borrowing rates will not be going up just yet.