Interest rates on hold

The Bank of England&#39s monetary policy committee kept UK interest rates at 4% last week – for the 12th month in a row, writes Harriet Williams.

Pundits say sluggish economic growth overseas and a weak UK manufacturing sector had supported the case for a rate reduction. But strong house price growth and consumer borrowing must have raised fears that a cut in interest rates would fuel inflationary pressures.

A cut from 4% would have been the first since November 8 2001 when rates moved down from 4.5% and could have hit already beleaguered savers – and some savings institutions had already trimmed rates in anticipation.

CBI chief economist Ian McCafferty says: “Business will be comfortable with this decision for the time being but the economic outlook remains troubling.”

Kevin Morgan, director of Hertfordshire-based EZI UK, says: “It&#39s disappointing. I thought the MPC might have bitten the bullet and come off a quarter.

“But there is mounting pressure for inflation, so perhaps they didn&#39t want to risk lower rates.”