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Friday 05th of December 2008
June 5, 2008

Interest rates on hold at 5%


by Kay Murchie
”Interest

The Bank of England’s Monetary Policy Committee (MPC) has met this morning and decided to keep UK interest rates on hold at 5%, which was widely expected.

The decision to keep rates the same was due to concerns about the pace of inflation. Rising food and fuel prices pushed inflation to 3% in April, exceeding the Government’s target of 2%.

According to Ian McCafferty, chief economic adviser to the CBI business group, the Bank of England had little option this month other than to leave interest rates on hold.

Oil and commodity prices are still of great concern and businesses are having to raise prices as profit margins get squeezed further, he added.

David Kern, economic adviser for the British Chambers of Commerce (BCC), said that the MPC should be considering the whole economic outlook and not just inflation.

We understand the critical need for the MPC to maintain credibility, but the MPC cannot disregard the worsening threats to growth, said Mr Kern.

Earlier this week, the Organisation for Economic Co-operation and Development predicted that UK growth would slow to 1.8% this year and to 1.4% next year.

Yesterday, the Home Builders Federation said a cut was imperative to avoid a severe housing market slowdown.

Recent figures from the Halifax, showed a 2.4% fall in house prices during May.

The Bank’s decision will undoubtedly cause concern among households who are faced with steep rises in the cost of living.

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