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UK rates left on hold – for another month at least

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05/04/2007

The Monetary Policy Committee (MPC) at the Bank of England has left the Bank Rate at 5.25% for the second month in a row.

While the decision spells good news for mortgage borrowers, many experts are tipping a 0.25% increase to 5.5% in May. Recent data has showed inflation edging up and the High Street still booming, mainly due to the influence of credit.

Colin Perry, a City analyst, said: “Today’s decision is good news for manufacturers, who have been asking for a respite in rate rises, and it gives the MPC time to see if pay increases are building up a dangerous head of inflationary steam.

“My own feeling is that the rate will be increased in May, probably for the last time this year, just to keep inflation in check and the economy sensibly balanced.”

In March, the members of the MPC voted eight to one to keep rates on hold, but that was against the backdrop of an extremely volatile stock market and worries about major economic recession.

Today the stock markets are in more ‘rational’ mood, although economists concede that the US economy is giving rise to concern, with massive fault lines showing in the highly geared sub-prime mortgage sector, for example.

“Domestically, though, things look good with moderate pay settlements, good employment and a healthy property market,” added Perry.

 

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