Expect interest rates “to hold at 0.5% until 2011 at least”

Date: London, 10 Dec 2009

There was little surprise in the markets today as the Bank of England kept interest rates on hold at 0.5% and left its £200 billion asset purchase program unchanged.

Mark Bolsom, Head of the UK Trading Desk at Travelex, the FX payments specialist, said, “We would have been very surprised if the Bank of England had made changes to either interest rates or their asset purchasing program today, as we expect rates to hold at 0.5% until 2011 at least.  

“The Bank of England won’t raise rates with Darling’s growth forecast of 1 to 1.5 per cent. Also, after the impact of the pre-budget report yesterday, the markets need some breathing space before the MPC announces any major policy decisions.”

The rate announcement had no real impact on Sterling, with the news expected and already priced into the markets, staying on hold at 1.1063 against the euro and $1.6307 against the dollar.

In the aftermath of the pre-budget report, Sterling dropped back slightly against a basket of currencies yesterday. Bolsom says, “The pound was affected by Chancellor Darling’s refusal to tackle the issue of fiscal deficit aggressively enough. Markets sold sterling due to concerns over the size of the UK’s debt and lack of solid detail on how this will be paid back, as well the implications that this could have for the UK’s Triple AAA credit rating.”

– Ends –

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Jessica Buttress
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About Travelex

Founded in 1976, Travelex is the world’s largest non-bank foreign exchange and payments specialist; with operations across four continents and 6,000 employees worldwide.

Travelex holds key positions in its three main areas of activity: Global Business Payments (TGBP), Currency Services and Card and Mobile Payments. Every year, more than 35,000 corporate clients and 30 million customers trust Travelex to manage their foreign exchange requirements.

Recently recognised by TowerGroup research as Industry Leader for payments innovation for SMEs, Travelex currently handles international payments worth £40 billion annually for over 750 large corporate and financial institutions.

Visit www.travelexbusiness.com/uk for more information or email the press office at jessica.buttress@travelex.com