Interest rates have been kept on hold once again as
fears over inflationary pressures stopped the Monetary
Policy Committee from cutting the cost of borrowing. The
Bank of England announced at midday that the MPC had voted
to kept the base rate steady at 4.5% for the second month
in a row.
Business leaders, retailers and unions had been calling
for a further cut in rates to inject some life into a
sluggish economy.
But a headline inflation rate that's been inching higher
and signs that the housing market is picking up again
persuaded the committee to keep rates at their current
level.
The Bank is charged by the Government with keeping inflation
below 2%. In July, it rose above the target for the first
time since the current CPI measure was adopted in December
2003.
Record oil prices and surging utility bills suggest prices
could rise even faster in the months ahead and Bank Governor
Mervyn King has expressed concern this could push up inflation.
The value of people's homes, and the corresponding impact
on the numbers moving house, is also seen as the biggest
driver of consumer confidence. Although separate reports
from Nationwide and Lloyds TSB pointed to falling confidence,
Halifax's monthly house price survey showed property values
were up for the second month in a row in September.
The MPC voted nine-nil in favour of keeping rates on
hold last month and although analysts predicted one or
two would vote for a further cut, the majority were happy
to keep rates on hold.
David Page, economist at Investec Securities, said that
the debate would become a little more interesting in future
months, with a few of the MPC members starting to discuss
doubts about economic growth forecasts going forward.
Today's decision by the MPC follows data showing the
annual rate of economic growth in the UK fell to its lowest
level in 12 years, while Chancellor Gordon Brown warned
last month that he was changing his economic growth forecast
for the UK.
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