Interest Rates were left unchanged at 0.50% in January 2010, the tenth month in a row. Interest rate forecasts have been on a roller coaster in recent weeks, firstly due to rising inflation figures and then the other way as it emerged exactly how weak the economic recovery really is. On 19th January it was announced that inflation had seen its biggest ever one-month rise between November and December from 1.9% to 2.9%. Several factors are creating inflationary pressures. The oil price more than doubled in 2009, VAT has been restored to 17.5% from 15% and, together with an improvement in economic fortunes, huge stimulus packages and quantitative easing there is concern that rates may need to rise to suppress rising prices. If inflation takes off then rate rises would be needed to control it. On the other side of the debate, some economists argue that the British economy is so weak that there will be little inflation longer term and therefore no need for rate rises. Forecasts of the first rise in interest rates range between April 2010 to mid-2011. |