Bank leaves base rate at 5.5 per cent

11 01 2008 United Kingdom

The Bank of England’s Monetary Policy Committee yesterday voted to hold the official bank rate at 5.5 per cent.

The MPC defied intense pressure to cut interest rates for the second month in a row, despite fears over signs of weakness in the UK economy and concerns across the business sector.

The MPC’s decision reflects perceived risks of increased inflation. Retail price inflation rate remains above 4 per cent and pound’s value has declined by 9 per cent during the past six months.

In response sterling fell to record lows against the euro. Fears over weakened consumer spending and the expectation of a cut in interest rates next month drove the pound down to euro 1.3282.

Sterling also sank to a nine-month low against the dollar of $1.9542.

Anatole Kaletsky, The Times’s chief economics commentator, said that Britain was likely to follow America, with consumer spending hit by falling house prices and a credit squeeze. If the Bank did not act today, he said, it should be ready to order a half-point cut in February.

The previous change in Bank Rate was a reduction of 0.25 percentage points to 5.5 per cent on 6 December 2007.

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