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October 4, 2007

Base rate held at 5.75%

by Gill Montia

Story link: Base rate held at 5.75%

The Bank of England’s Monetary Policy Committee has voted to keep the base rate at 5.75% for October.

The base rate was also kept on hold in September and this month’s decision was widely expected by economists.

Analysts are expecting the Bank to wait until the effects of the recent global credit squeeze are more evident, before making changes to the base rate.

However, there have been calls for a reduction in interest rates to counter expectations of an economic slowdown in the UK in 2008.

A rate cut would also ease the problems in the global credit market whilst helping UK homeowners who have seen mortgage rates increase this year.

The Bank has to balance these benefits against inflationary concerns and despite UK inflation falling in August, oil and food prices are continuing to rise.

The Consumer Price Index, fell to 1.8% in August, its lowest level for over a year, and below the government’s 2% target.

According to Ian McCafferty, the chief economic adviser to the Confederation of British Industry, “What’s not in doubt is that the next move will be down.”

The British Chambers of Commerce also want to see a rate cut in November.

 

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