The worst of two possible worlds

The Bank of England left interest rates on hold today. It is the second month in succession that the Monetary Policy Committee has chosen to sit on its hands.

David Kuo, Head of Personal Finance at Fool.co.uk, says: "The Bank of England's decision to leave interest rates unchanged is not entirely unexpected, given that it is trying to slay inflation without butchering the economy at the same time.

"But by sitting on its hands, the Monetary Policy Committee is achieving neither. It must therefore decide what its priorities are. Perching on the fence is leaving many consumers confused as to whether the Bank is there to murder inflation or mollify the Government.

"As it stands, consumers are caught in the worst of two possible worlds. Rising household prices are steadily eroding disposable income, but without any boost being provided to savings.

"Fool.co.uk urges consumers to take control of their own finances because the Bank of England will need to tackle inflation sooner or later.

"Homeowners with mortgages should pay down as much as they can afford before interest rates are eventually hiked. Meanwhile, savvy savers can exploit some abnormally high savings rates as certain desperate lenders try to rake in as much cash as possible. Getting a high rate of interest on your savings will go some way towards protecting your money from inflation.

"However, savers should note that three out of five people2 would not trust a bank with more than £35,000 of their savings. So, when comparing savings accounts it's important to also ensure that you stay within the Financial Services Compensation Scheme limit of £35,000.

"The Bank of England may be having problems keeping a lid on inflation, but that will pale into insignificance if you lose your savings."