Interest rates kept on hold
THE Bank of England delighted millions of homebuyers, businesses and the City today when it decided to keep interest rates on hold for the seventh month in a row amid conflicting signals on the outlook for the economy.
Signs of a cooling property market, and a slowdown in High Street spending, appear to have convinced the monetary policy committee to reject calls from some economists to hike rates.
However, the consensus is that the committee will boost rates by a quarter of a percentage point from the current 4.75% before the summer as clearer data emerge.
Inflation is continuing to edge up towards the Bank's 2% target and figures from the British Bankers' Association show consumer borrowing is on the increase.
However, that borrowing is not being reflected in High Street sales and the British Retail Consortium says that sales were subdued in February, continuing the poor run of trading since Christmas.
The MPC has raised the cost of borrowing five times since November 2003 in a bid to rein in runaway house prices and quell consumer spending. It is believed the Bank will wait until first quarter GDP data are released at the end of April before making a decision on rate movements.
Philip Shaw, chief economist at Investec, said: 'On balance, we continue to think it more likely that rates have peaked, but this is becoming an increasingly close call.'
Royal Bank of Scotland economist Geoff Dicks said: 'The rate hike faction within the MPC may well have gained one or two new recruits today but the majority of the committee will want to see evidence of further consumer demand before voting for higher rates.'
MPC member Paul Tucker voted for an increase last month but the City will have to wait until next week when the BoE releases its minutes to see if any other members have joined him.
