No change for interest rates in UK
October 25, 2007
Following this week’s Monetary Policy Committee meeting on Thursday, the Bank of England has announced that interest rates are to be kept on hold at 5.75%, which came as no surprise to most economists and analysts, who had widely predicted that this would happen.
This is the third month in a row that interest rates have been kept on hold, with the last rise of a quarter point taking place back in July of this year, which took the interest rate up to its current level of 5.75%.
It is thought that a number of factors have affected the Bank of England’s decision to keep interest rates on hold, but the two main factors are the recent credit crunch and the rate of CPI inflation. It is thought that the Bank of England is taking a wait and see stance in terms of the global credit crunch to see what effect the recent turmoil in the financial markets will have on the economy as a whole. Also, CPI inflation has now come down to 1.8%, which is within the government’s 2% target and the lowest it has been in a year.
A number of economists are not only predicting that interest rates will not go up for the remainder of this year but also that there is a good chance that they will actually fall towards the end of the year.
CBI chief economic adviser Ian McCafferty stated: “An interest rate cut was unlikely this month as there are, as yet, few signs of any serious damage to the real economy from the upheaval in the money markets. What’s not in doubt is that the next move will be down.”
An official from the British Chambers of Commerce stated that it was important that interest rates were cut this year: “Following the Northern Rock crisis, the Bank of England must restore its credibility and authority. It must show greater sensitivity to the problems of the wider economy, while at the same time making it clear that it will not yield to outside pressures.”
Alan Wright
25th October 2007
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