The Bank of England's 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's 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't want to risk lower rates.”