Interest rates held as expected
Borrowers are breathing a sigh of relief after the Bank of England voted to hold interest rates at their current level of 5.25 per cent.Today's decision from the Bank's monetary policy committee (MPC) had been widely predicted by economists as inflationary pressures in Britain subsided.Last month the MPC voted 7-2 to hold base rates following January's shock quarter of a per cent rise.But there were no such increases this month with official figures expected to reveal later in March that consumer price index (CPI) inflation has again tumbled from the three per cent peak experienced late last year.Analysts still widely believe however that the Bank will up rates a quarter of a per cent to 5.5 per cent in April, reverting to its hold-hold-raise pattern employed in the latter half of 2006.Today's decision has been warmly welcomed by retailers, with the British Retail Consortium insisting that the right course of action has been taken."We have yet to see anything like the full effects of the November and January increases," said the trade association's director general Kevin Hawkins.The British Chambers of Commerce (BCC) agreed, further arguing that "worsening global risks" meant the Bank should hold on upping rates in the coming months."We must avoid at all costs damaging monetary overkill," claimed BCC economic adviser David Kern."While we acknowledge that inflation remains a potential UK danger, the risks have eased over the past month."But Global Insight analyst Howard Archer maintains that interest rates will be lifted in May if not April.He explained: "The exact timing of the anticipated interest rate hike is likely to depend critically on the strength of economic activity and inflation data over the next few weeks as well as wage developments."We believe that 5.5 per cent will mark the peak in interest rates as growth loses a little momentum over the coming months and inflation heads back down."
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