Interest rates on hold again
The Bank of England (BoE) has announced today that it will keep interest rates unchanged at 5% this month.
With signs the economy is heading into a slowdown, or even recession, there have been calls from some for the BoE to cut rates as a stimulus. The decision to hold rates reflects the banks focus on inflation rather than economic growth.
Most evidence points to annual consumer price inflation rising above 4% when July’s figure is published next week and some economists feel inflation could top 5% before the end of the year, as energy firms raise their prices.
At the same time, activity is slowing in all key sectors of the economy, business confidence is waning and falling house prices and tight credit conditions have dented consumer spending. The economy grew just 0.2% in the second quarter and the International Monetary Fund has again revised down its forecast for
UK economic growth this year and next year.
There is some hope for those with mortgages who need the rates to fall in order to increase their disposable income. A spokesman for the BoE pointed out in an interview that since the price of oil has fallen from its peak the fear of inflation is less than it was and a rate cut could come ‘as soon as November.’
