The Bank of England has voted to keep interest rates at 5% for the fifth month in a row, despite pleas for a cut from businesses.
The Bank’s Monitary Policy Committee (MPC) announced the decision today as it continued to wrangle with rising interest rates and falling house prices.
The announcement came just two days after a report by the Organisation for Economic Cooperation and Development (OECD) said the UK’s economy would sink into recession ‘by the end of the year’.
David Kern, chief economic adviser to business lobby organisation the British Chambers of Commerce (BCC), said the widely-anticipated decision had been ‘understandable’.
“In the face of rising inflation, the MPC must maintain credibility. But the MPC cannot ignore the fact that the UK economy is very likely in technical recession already, and there are distinct risks the situation could worsen.
“A major recession can still be prevented if prompt action is taken. The MPC should start cutting interest rates in the next few months, as soon as UK inflation peaks.”
But Andrew Montlake, partner at independent mortgage broker Cobalt Capital, criticised the decision.
“Once again the Bank of England has shown caution, a reluctance to make the rate cut that is urgently needed because of its strict remit to control inflation,” he said.
“Sometimes you have to play it as you see it, take action even if that action means you’re not doing things strictly by the book. If we continue with this wait-and-see approach for much longer, it will be a case of waited-and-wished-we-bloody-well-hadn’t.”
© Crimson Business Ltd. 2008