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March 6, 2008

Base rate held at 5.25%

by Gill Montia

Story link: Base rate held at 5.25%

The Bank of England’s Monetary Policy Committee (MPC) has voted in favour of holding the base rate at 5.25% in March.

The decision came as no surprise to economists and financiers who are still predicting that cuts in interest rates will be needed by the middle of this year, to shore up a slowing UK economy.

The committee was faced with the difficult task of balancing accelerating inflationary pressures with slowing economic growth.

The Bank’s governor, Mervyn King, has warned that inflation could rise well above the Government’s 2% target in the coming months.

In addition, the MPC may have taken account of that fact that next week’s budget could introduce new factors and considerations.

Last month Mr King indicated that UK interest rates would be reduced gradually throughout the coming year and the consensus amongst economists is that the very real risk of a sharp economic downturn in the UK means that further interest rate cuts are on the Bank of England’s agenda.

 

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