Bank of England holds rates

11 July 2008

The UK's central bank has kept rates at five per cent for another month.

It is understood that concerns over rising inflation led the Bank of England's nine-member Monetary Policy Committee (MPC) to forego a rate cut, despite the continuing economic slowdown being felt across Europe.

Indeed, these same worries over rising prices led the European Central Bank to tighten rates by 25 basis points last week.

Commenting on the move, Vicky Redwood at Capital Economics said: "We still think the next move [from the Bank] will be down.

"It might not be for a few months yet, although if the activity data continues to weaken sharply as it has done in recent weeks then we might not have to wait too long."

"If the MPC reduces interest rates, it risks losing control of inflation," Graeme Leach at Britain's Institute of Directors added.

"Conversely, if it increases interest rates it risks losing control of growth and could trigger a recession."

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