Interest rates unchanged
The Bank of England has opted to maintain the cost of borrowing at the current 3.5 per cent.
The Bank’s Monetary Policy Committee (MPC) chose to leave interest rates unchanged this month. However, many analysts are expecting a rise before Christmas.
Initially analysts had expected the MPC to raise interest rates after the UK’s economy showed surprising growth.
Figures from the Government showed that GDP grew by 0.6 per cent in the second quarter of 2003. The growth was double what was expected and triggered fears that the Bank’s decision to cut interest rates in July by 0.25 per cent had been premature.
However, on Tuesday the Office for National Statistics released figures that showed manufacturing had contracted.
The ONS’ figures showed that manufacturing output fell by 0.6 per cent in August, contradicting last week’s Chartered Institute of Purchasing and Supply survey that found a third consecutive monthly rise in output.
The MPC will still be concerned that the historically low interest rates have helped to maintain ever-increasing house prices. The Halifax’s latest house price survey has continued to show strong house price growth.
Mortgage approvals and demand for loans have also been driven by the low interest rates. However, with fewer new entrants to the market and growing fears that an interest rate rise is on the cards the housing market is expected to slow.
The MPC’s concern over the housing market and escalating levels of consumer debt were highlighted in the minutes of last months meeting. The minutes showed that a minority of the nine strong committee were considering raising rates to manage debt levels.
