Interest rates remain on hold
The Bank of England has held interest rates at 4.75 per cent this lunchtime.
It is the sixth month in a row that the Bank’s Monetary Policy Committee has maintained the cost of borrowing at its current level.
The hiatus comes after the bank upped rates five times in ten months between November 2003 and August 2004.
However, analysts expect further rises later in 2005 as consumer confidence returns to the housing market and manufacturing output grows.
Manufacturing data released this week revealed that not only did output rise by 0.5 per cent in December, but there were also upward revisions to past data
Simon Rubinsohn, chief economist for Gerrard, expects rates to rise to five per cent during the first half of the year. “We are penciling in a rise in May,” he said.
But David Frost, director general of the British Chamber of Commerce urged the Bank to remain cautious: “Given the underlying risks facing the economy, we urge the MPC to persevere with a cautious and a flexible stance, and reject calls for early interest rate increases. “
The MPC’s policy of steady rate increases since the end of 2003 appears to have succeeded in taking the heat out of the housing market.
However, there is still concern about consumer debt. High street sales may have fallen short of some expectations in recent months but the British public’s love affair with personal loans and credit cards shows no sign of abating.
