Interest rates remain at 4.5% for July

Interest rates were left unchanged despite warnings from Bank of England governor Mervyn King that rates may have to keep rising to cool house prices.

In June rates went up for a second consecutive month, the third rise in base rates this year.

The decision will be welcomed by manufacturers and mortgage holders, although it is less-welcome news for those with savings accounts.

The Bank's Monetary Policy Committee (MPC) is expected to start raising rates again from August.

There have been recent tentative signs that soaring house prices and runaway consumer borrowing may have started cooling, while inflation is still some way below target. Last month Mr King warned that UK property prices were "well above what most people would regard as sustainable in the longer term".

Last week the Nationwide and Halifax said that house price growth had eased in June.

At the time Martin Ellis, Halifax chief economist said it indicated that the recent increases in interest rate levels may have started to "curb" housing demand.

'Pause for breath'

Following Thursday's decision, one manufacturers' organisation said the decision was the right one, giving the Bank of England time to assess the impact of recent rises in the cost of borrowing.

"With tentative signs from the housing market and from business surveys that activity is cooling a little, the Bank was right to pause for breath today," said Engineering Employers' Federation chief economist Steve Radley.

"We urge the Bank to continue its cautious approach,"
The British Chambers of Commerce (BCC) also welcomed the decision.

"We are pleased the Bank has decided to hold this month. After consecutive monthly rises in May and June it would have been premature to put rates up again so soon," said David Frost, director general of the BCC.

Full Story : BBC


9th July 2004

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