Bank set to ‘sit tight on rates’ amid growing optimism

BANK OF England interest rate setters are expected to remain in wait-and-see mode today amid hopes the vaccine rollout will help the economy bounce back faster than first thought.

Economists expect the Bank to keep rates at the record low of 0.1 per cent and hold its quantitative easing programme at £895bn after official data showed a smallerthan-feared hit to the economy from the latest lockdown.

Bank governor Andrew Bailey said on Monday that he is more positive over the future of the economy and now expects it to return to pre-pandemic levels at the end of the year thanks to the vaccine programme’s “huge” success.

But he added that his increased optimism comes with a “large dose of caution”, with uncertainty remaining over the path of the pandemic.

The rates decision comes amid growing concerns of an inflation surge at the end of the year, driven by the economic recovery as Britons are expected to splurge their lockdown savings.

Having predicted negative interest rates less than two months ago, financial markets are now pencilling in rate hikes next year to cool inflation.

Mr Bailey confirmed the inflation outlook would be considered by the Bank’s Monetary Policy Committee (MPC) at this week’s meeting.

But he added that the central bank does not expect inflation – currently at 0.7 per cent – to hit suggested heights of between four and five per cent. Instead, he believes it will return to around two per cent in the next few months. Howard Archer, chief economic advisor to the EY Item Club, said: “The odds strongly favour the Bank of England’s Monetary Policy Committee sitting tight at their March meeting.”

SOME £171M is being allocated to nine green tech projects to study the rollout of infrastructure, such as carbon capture and storage.

This includes over £21m for the Zero Carbon Humber Partnership project which aims to turn the Humber region into a net zero cluster by 2040.

This project’s vision is to deliver H2H Saltend, one of the world’s first at-scale low carbon hydrogen production plants on the north bank of the Humber, and CO2 and hydrogen pipelines enabling industrial sites and power stations across the Humber to switch to hydrogen and/or capture and transport their emissions.