Bank of England leaves rates unchanged at 4.5 percent

Bank of England leaves rates unchanged at 4.5 percent

	Published : Thu, 06 Apr 2006 18:05 By : Amy Watts Print this Story

LONDON - The Bank of England has left the repo rate unchanged for the eighth month in a row and retained the same rate of 4.5 percent for another month at least. The Bank’s decision was on expected lines and analysts said that the mixed economic data meant that the Bank did not have much choice, but to retain the rates.

"For now at least, the Bank of England will be very wary that a trimming of interest rates could excessively stimulate the housing market and risk send housing prices markedly higher," said Howard Archer, chief UK economist at Global Insight. The annual inflation rate has held steady at 2 percent and this meets with the Bank's target and hence the MPC has not moved towards any change. "Future growth still depends critically on developments in consumer spending, and we suspect that this will be relatively muted over the coming months," Archer added saying that he believed the Bank would eventually cut the borrowing costs, but felt this would not happen before August.

The MPC has instituted a quarter-point cut in August last year. The British Chambers of Commerce (BCC) said that although this decision was expected, the Bank should be flexible in its stance, "We do not criticize today's MPC decision. But given the risks facing the economy, we urge the MPC to consider an early cut in interest rates if economic indicators worsen. We strongly urge the MPC to maintain a flexible stance," said BCC director general David Frost. "Most analysts, and the Bank of England's own comments, acknowledge the risks to economic growth."

The Confederation of British Industry was disappointed that the rates were not cut, "We are disappointed that the Bank did not take the opportunity to provide some support for the fragile economy," said Ian McCafferty, economic adviser of CBI. "With wage settlements restrained and the consumer cautious, the inflation outlook is benign and the economy is set to grow at less than its potential through 2006."