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Bank of England sticks at 5.25%

The Bank of England has kept interest rates at 5.25 per cent, despite slowing consumer spending.Several reports have suggested that the UK might be moving towards recession due to the ongoing credit crunch.Ordinarily, this would lead to interest rate cuts in order to provide an economic stimulus.However, concerns over increasing food and fuel costs appear to have prevented the Bank from making the reductions.Despite today's decision, most banks and mortgage lenders are predicting that interest rate reductions will be made later in the year.Henk Potts at Barclays commented: "The MPC now has to respond to the effects of slowing economic growth and the ongoing threat of inflation, a fine but difficult balancing act. "We think that [they] will cut rates by a further 25 basis points in May and August."Barry Naisbitt, chief economist at Abbey, said: "I presume that this month the majority of MPC members judged that the most recent evidence of slowing economic activity needed to be balanced against both their expectation that activity would slow and that inflation indicators remain high. "I expect the balance of views to change as time passes, so that a further rate cut could be on the cards in the next couple of months."The Bank has now reduced interest rates twice in the past five months.

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