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UK rates left unchanged at 4.75% UK rates left unchanged at 4.75%
(20 minutes later)
UK interest rates have been left unchanged at 4.75% following the Bank of England's latest meeting.UK interest rates have been left unchanged at 4.75% following the Bank of England's latest meeting.
The move was widely expected although borrowers and the markets had been jittery over the prospect of another rate rise.The move was widely expected although borrowers and the markets had been jittery over the prospect of another rate rise.
In August, the Bank had raised borrowing costs to 4.75% from 4.5%, its first increase in two years.In August, the Bank had raised borrowing costs to 4.75% from 4.5%, its first increase in two years.
Some analysts are predicting that a further rise, to 5%, is needed in order to keep inflation in check.Some analysts are predicting that a further rise, to 5%, is needed in order to keep inflation in check.
Inflation to ease?Inflation to ease?
The EEF manufacturers' organisation welcomed the decision by the Bank's Monetary Policy Committee (MPC), saying the case for another rise had not been proven. The decision by the Bank's Monetary Policy Committee (MPC) was "no surprise" said Philip Shaw, chief economist at Investec.
Lower energy prices have helped to cool inflationary pressures, according to the EEF's chief economist, Steve Radley. Whilst we are not out of the woods yet, there are some signs that the biggest drivers of the recent increase inflation are set to ease over the next year Steve Radley, EEF
"There had been some nerves over a possible rise but in our view there was no reason for another increase," he said.
"We continue to predict that the MPC will raise borrowing costs in November but it is not a done deal."
The CBI business group said that while oil prices had fallen from record highs in July, there were other pressures on inflation.
"With the economy growing solidly but on course to slow next year, business will hope that when the Bank does make its move, it will be well signalled, and that one increase will be enough to keep inflation well controlled through 2007," said Ian McCafferty, the CBI's chief economic adviser.
The EEF manufacturers' organisation welcomed the decision saying the case for another rise had not been proven.
EEF chief economist Steve Radley said lower energy prices have helped to cool inflationary pressures.
"Whilst we are not out of the woods yet, there are some signs that the biggest drivers of the recent increase inflation are set to ease over the next year," he said."Whilst we are not out of the woods yet, there are some signs that the biggest drivers of the recent increase inflation are set to ease over the next year," he said.
"So long as this remains the case the Bank can afford to keep its powder dry.""So long as this remains the case the Bank can afford to keep its powder dry."
In September, 42% of retailers said sales were up on a year ago Eye on prices
Inflation remains the biggest factor indicating that more rate rises may be needed.
The latest Office for National Statistics (ONS) figures showed that inflation was 2.5% in August, up from 2.4% the month and above the government target of 2%.The latest Office for National Statistics (ONS) figures showed that inflation was 2.5% in August, up from 2.4% the month and above the government target of 2%.
In September, 42% of retailers said sales were up on a year ago
The Bank itself has raised the prospect that inflation could rise as high as 3% should fuel and commodity costs continue to rise.The Bank itself has raised the prospect that inflation could rise as high as 3% should fuel and commodity costs continue to rise.
Another key driver of rate decisions, the housing market, appears to be stronger than expected, with surveys in the past week from both Halifax and Nationwide indicating steep increases in average house prices.Another key driver of rate decisions, the housing market, appears to be stronger than expected, with surveys in the past week from both Halifax and Nationwide indicating steep increases in average house prices.
UK manufacturing - often a weak spot - has shown signs of bullishness too, while retailers seem to be benefiting from consumers' continued willingness to spend.UK manufacturing - often a weak spot - has shown signs of bullishness too, while retailers seem to be benefiting from consumers' continued willingness to spend.
Gloomy outlook
One recent economic survey does seem to indicate a discrepancy between consumers' attitudes towards the here and now, and their expectations for the future.
Nationwide's Present Situation Index, which gauges current feelings about employment and the economy, rose in September for the first time since March.
But the building society's consumer confidence survey found that faith in future prospects for the economy remained gloomy - despite picking up slightly last month.
"Consumer confidence remains low and, despite improving, has not recovered fully since the slump reported (in August)," said Nationwide's executive director, Stuart Bernau.
"With such mixed messages in the economy and inflation still above target, the MPC will have to decide whether to raise rates sooner rather than later."