No fireworks on ‘Super Thursday’

Any interest rate rise has been pushed further into the future once more today.

In what was the second Super Thursday, a day when the Bank of England (Bank) releases its quarterly inflation report, plus minutes from its previous policy meeting as well as making a decision on interest rates, the outcome saw the Bank once again hold UK interest rates at the record low of 0.5%. UK interest rates have now remained on hold for 6.5 years.

This despite the fact that in July, the Bank’s Governor, Mark Carney had intimated that interest rates would rise towards the turn of this year. Some economists now believe interest rates will not rise until the second quarter of next year – or even later.

Part of the reason given was that the outlook for global growth has weakened, and this is depressing the risk of inflation. Its quarterly inflation report cites emerging market economies for that weakness, saying that growth in those regions had "slowed markedly".

The inflation report also stated that inflation is likely to remain lower than previously predicted due to the recent falls in oil and other commodity prices. It said that it does not expect inflation to return to government target of 2% for a couple of years. Inflation is currently at -0.1%.

With regards the UK economy, however, Mark Carney was more upbeat. He described it as "robust" and "resilient", with forecast growth of 2.7% this year, 2.5% in 2016 and 2.7% in 2017 - a tad weaker than the Bank predicted in August but above most economists' expectations.

All this is good news for homeowners with mortgages but not so good for savers or those looking to invest for income. For the latter, equity income funds and corporate bond funds offer good yields as well as the potential for capital growth. However, unlike cash, they are not guaranteed and so may fall in value, which means you could get back less than you invest.

For more information or help on income investing, contact Kellands.

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