Interest rate steady at 4.5%; Brown blames Bank for slowdown |
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Published
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Sat, 10 Dec 2005 10:05
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LONDON: The Bank of England yesterday left base rate unchanged for the fourth consecutive month, disappointing retailers and households that looked forward to a reduction for Christmas.
The decision taken by the Bank’s nine-member Monetary Policy Committee is in line with economists and analysts’ recommendations to revive the sluggish economic growth. Most had forecast that the Bank would maintain borrowing cost at 4.5 percent.
The MPC is said to have considered the growing concern that high energy prices could spur inflation making workers demand higher wages. Many members feared a surge in wage inflation to be the biggest risk to inflation rate.
MPC member Charles Bean warned that although inflation had slid to 2.3 percent in October, it could kick up again as businesses cannot be expected to “keep squeezing profit margins”.
The MPC also said that they would wait for further developments in the economy before voting for any change in the interest rate. They would particularly watch consumption levels this Christmas but as the statistics are gathered only in the following month, any decision it affects would have to wait until February. That can only mean the interest rate remains steady at 4.5 percent in January.
Meanwhile Chancellor Gordon Brown has blamed the Bank’s decision to raise interest rates four times before the election. In this week’s Pre-Budget report, Brown had revised his economic growth forecast from 3 - 3.5 percent in March to 1.75 percent. Brown explained that upping the interest rate four times was certain to reflect on consumer spending besides affecting the housing market as fewer Britons took mortgages to buy houses. He said none “would doubt that four interest rate rises were bound to be the major factor”.
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August rate cut was a close run thing according to the BoE’s minutes 