Interest Rates on hold.......

Tom_Saunders

Interest rates on hold at 5.25%
Press Association
Thursday March 8, 2007 12:23 PM


Homeowners were given a boost after policymakers at the Bank of England voted to keep interest rates at 5.25%.

The no-change decision had been widely expected, although economists said a rate hike was still likely in the coming months, possibly in May.

Interest rates have risen three times since August as the Bank's Monetary Policy Committee (MPC) attempts to keep a lid on inflationary pressures.

Industry leaders said MPC members were right to pause for breath, particularly after this month's stock market volatility and amid an uncertain outlook for inflation and the global economy.

David Kern, economic adviser to the British Chambers of Commerce, said: "Events over the last few weeks support our view that the MPC should wait before contemplating further increases in UK interest rates.

"Given the worsening global risks, highlighted by the acute turmoil on the international financial markets, an early hike in rates could have very harmful effects on business confidence and on the economy's growth prospects."

The Bank of England recently indicated that interest rates would need to rise one more time to keep inflation near its long-term target of 2%.

But the pressure for immediate action eased recently after the Consumer Prices Index saw its sharpest drop since January 2003 when it fell from 3% in December to 2.7% in January. Figures for February will not be published until March 20, depriving the Bank of a key piece of data this week.

Economists said there had been little in the way of news to change the committee's stance after a 7-2 vote in favour of no change last month.