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Bank keeps interest rates on hold Bank keeps interest rates on hold
(about 1 hour later)
Bank of England policymakers have decided to keep UK interest rates unchanged at 5.5%.Bank of England policymakers have decided to keep UK interest rates unchanged at 5.5%.
The Bank faced a tough decision, having to balance signs of a slowdown in consumer spending against indications of growing inflationary pressures. Analysts said the Bank faced a tough decision, having to balance signs of a slowdown in consumer spending against growing inflationary pressures.
The decision is likely to disappoint some retailers, who had called for a cut after poor Christmas sales figures.The decision is likely to disappoint some retailers, who had called for a cut after poor Christmas sales figures.
While rates have been held this month, many analysts expect the cost of borrowing to be lowered in February.While rates have been held this month, many analysts expect the cost of borrowing to be lowered in February.
While a rate cut could have lifted both consumer and general business confidence, it could also have risked fuelling price pressures growing on the back of higher energy and food bills. The Bank's Monetary Policy Committee (MPC) last cut rates in December, reducing them to 5.5% from 5.75%.
Energy firm Npower increased both its gas and electricity prices last week and warned that its rival energy providers were likely to follow suit. A rate cut on Thursday could have lifted both consumer and general business confidence, but it could also have risked fuelling price pressures driven by higher energy and food bills, analysts said.
Oil prices also remain near record highs of above $100 a barrel. Last week, energy firm Npower increased both its gas and electricity prices and warned that its rival energy providers were likely to follow suit. Oil prices have also remain near record highs of more than $100 a barrel.
The Bank's Monetary Policy Committee last cut rates in December, reducing them to 5.5% from 5.75%.
'Missed opportunity''Missed opportunity'
The MPC resisted widespread calls for a cut and the decision disappointed many business groups. The British Chambers of Commerce (BCC) said the Bank had missed an opportunity to underpin consumer confidence, and limit the damage from a global credit crunch and problems in the US mortgage market.
The British Chambers of Commerce said the MPC had missed an important opportunity to underpin confidence and limit the damage to the economy.
"A modest interest rate cut would have alleviated the threats to the banking system and would have helped restore the smooth flow of credit in the economy," said David Kern, economic adviser to the BCC."A modest interest rate cut would have alleviated the threats to the banking system and would have helped restore the smooth flow of credit in the economy," said David Kern, economic adviser to the BCC.
The EEF manufacturers' organisation said the growing chance of a recession in the United States, as well as the effects of the credit crunch on business and consumer confidence, outweighed any reasons for a delay. The manufacturers' organisation EEF said the growing threat of a recession in the US, as well as the effects of the credit crunch on business and consumer confidence, outweighed any reasons for delaying a rate cut.
"The evidence from the past month points to a growing risk of a weaker economy and there is little reason to believe the case for a cut will be any less strong next month," EEF Chief Economist Steve Radley said."The evidence from the past month points to a growing risk of a weaker economy and there is little reason to believe the case for a cut will be any less strong next month," EEF Chief Economist Steve Radley said.
The MPC is now widely expected to cut rates in February, when the Bank releases its quarterly inflation report including new growth and inflation forecasts. The MPC is now widely expected to cut interest rates in February, when the Bank releases its quarterly inflation report including new growth and inflation forecasts.