Interest Rates to Remain at 5%
10/07/2008
The Bank of England has refused to bow to pressure to cut interest rates: today it announced the base rate would remain at 5%.
The decision will not come as a surprise to many, even though there had been a considerable amount of pressure from businesses to cut borrowing costs in the wake of the continued house price falls and general economic slowdown.
However, the rate of inflation (currently 3.3%, when the target rate is just 2%) has made it unfeasible for the Bank to lower interest rates.
"If the MPC reduces interest rates, it risks losing control of inflation," said Graeme Leach, chief economist at the Institute of Directors.
"Conversely, if it increases interest rates it risks losing control of growth and could trigger a recession."
New evidence of a UK-wide economic slowdown is constantly being uncovered. The UK's biggest mortgage lender the Halifax has announced house prices were 6.1% lower in June than a year ago, and a report from the British Chambers of Commerce warns of a serious risk of recession in the UK within months.
Meanwhile, recruitment firm Hays says that wider international economic issues are starting to affect the UK permanent job market.
The decision will not come as a surprise to many, even though there had been a considerable amount of pressure from businesses to cut borrowing costs in the wake of the continued house price falls and general economic slowdown.
However, the rate of inflation (currently 3.3%, when the target rate is just 2%) has made it unfeasible for the Bank to lower interest rates.
"If the MPC reduces interest rates, it risks losing control of inflation," said Graeme Leach, chief economist at the Institute of Directors.
"Conversely, if it increases interest rates it risks losing control of growth and could trigger a recession."
New evidence of a UK-wide economic slowdown is constantly being uncovered. The UK's biggest mortgage lender the Halifax has announced house prices were 6.1% lower in June than a year ago, and a report from the British Chambers of Commerce warns of a serious risk of recession in the UK within months.
Meanwhile, recruitment firm Hays says that wider international economic issues are starting to affect the UK permanent job market.
