MPC under pressure to hold interest rates

The Bank of England’s Monetary Policy Committee is to meet later this week and it is being urged to keep interest rates at 5% to stave off a recession.

Last month, it was widely believed by analysts that interest rates would have to rise in order to manage runaway inflation.

It is believed by many that the nine-member committee will vote three ways, with one third voting for a cut, one third voting for a rise while the other voting for no change.

Last week saw gloomy economic news, consumer confidence is low due to soaring inflation, rising food and fuel costs while house prices continue to fall.

According to Steve Radley, chief economist at the Engineering Employers’ Federation, interest rates should be kept at 5%. The slowing economy and wage moderation should help to prevent inflation.

However, if the current economic climate continues to gather pace, the Monetary Policy Committee must be prepared slash rates again, added Mr Radley.

David Kern, economic adviser to the British Chambers of Commerce, shares a similar view as Mr Radley and said the Monetary Policy Committee cannot ignore these worsening threats to growth and believes if interest rates were increased, it could be devastating.

The Monetary Policy Committee meeting will commence on Wednesday and an announcement will be made around noon on Thursday.

Since December, the Bank of England have cut interest rates 3 times.

Last week saw the European Central Bank raise Eurozone interest rates 0.25% to 4.25%.

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