MPC decision: Bank resists calls for cut in interest rates

UK interest rates have been left unchanged at 5.75 per cent for the fourth month in a row, despite calls by retailers and property market experts for an immediate cut.

The British Retail Consortium last week said consumer spending was slowing dramatically, while exporters want a rate cut to halt the upward movement of sterling, which is at a 25-year high against the dollar.

Meanwhile, most housing market surveys show house price inflation starting to go into reverse after five interest rate rises since August last year.

Overall, though, the decision on rates by the Monetary Policy Committee (MPC) of the Bank of England had been expected, after concerns expressed by Kate Barker, below, an MPC member, that record high oil prices could lead to rising inflation and wage demands. Keeping rates at 5.75 per cent should help the Government meet its inflation target of 2 per cent.

Among business leaders, reaction to the committee's wait-and-see stance was broadly supportive, with Ian McCafferty, the CBI's chief economic adviser, saying: "Neither the outlook for inflation nor the economy clearly justified a cut."

Nevertheless, the smart money is on a rate cut sooner rather than later. Richard Dingwall-Smith, chief economist at insurer Scottish Widows, said: "We expect to see the official interest rate trimmed to 5.25 per cent within six months, as evidence mounts that the economy is slowing enough to keep inflation to target."