No change in interest rates
For the sixth month in a row the Bank of England’s Monetary Policy Committee has decided to maintain interest rates at 4.75 per cent.
This is the longest period of interest rate stability since February 2003, when rates fell after 14 months of continuity.
The decision came as little surprise, as it had been predicted by the vast majority of commentators.
Head of the British Chambers of Commerce (BCC), David Frost, said: “Today’s no change decision is correct. But, if there are clear signs that the economy slows, the MPC should be ready to take quick corrective action and cut rates.”
He added: “Dismal reports from the retail trade about Christmas sales are worrying, if they indicate a more general weakening in consumer spending. The housing market outlook remains highly uncertain. It is widely accepted that, if house prices start falling more sharply, the risks facing the economy will worsen considerably.
Chief economist at the Institute of Directors (IoD), Graeme Leach, though suggested a rise may be possible.
He said: “We expect the Bank of England to proceed with caution over the next two months, but one further quarter point interest rate rise in the current cycle is still possible.
“Although latest figures show household lending and earnings growth are strong, the UK economy may appear temporarily weaker than it really is in January-February. Firstly, because the impact of the Tsunami may dampen consumer spending for a short time – less because of the amount of charitable giving and more because of a reluctance to display conspicuous consumption. Secondly, due to the growth in on-line consumption which may fall outside officially recorded figures and retail surveys.”
