Interest rate hold broadly welcomed
Business groups have broadly welcomed the Bank of England’s decision to keep interest rates on hold this month.
The Monetary Policy Committee (MPC) announced at lunchtime on Thursday that they would be maintaining the base rate at 4.75 per cent.
The reasons for the decision will not be formally known until the minutes of the meeting are released on 29th October, but recently released figures indicating a slowdown in the housing market and consumer spending are likely to have been a factor.
Graeme Leach, the chief economist at the Institute of Directors, branded today’s decision as “sensible”.
He said: “Today’s decision was as expected. The Bank of England is sensible to adopt a wait and see approach as the effects of the interest rate rises over the past year take effect.
“There is clear evidence of a housing market slowdown and manufacturing output has fallen for three months in a row. But this does not mean that interest rates have peaked. The UK output gap is now positive. In other words, actual output is above potential output, thereby risking an acceleration in inflation. We think there is a 50-50 chance of another interest rate rise before the year-end.”
The general welcome was echoed by the CBI’s chief economic adviser. Ian McCafferty said: “Recent evidence suggests that the Bank has been successful in slowing growth from the rapid pace seen in the first half of the year to a more sustainable rate going forward.
“Rates are now likely to be close to their peak and the Bank should wait until things are much clearer before deciding if any further medicine is required.”
