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Bank of England holds rates at 4%

The Bank of England&#39s monetary policy committee has left UK interest rates on hold at 4%.

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.

The MPC has now left rates on hold for a year.

CBI Chief Economist, Ian McCafferty says: “Business will be comfortable with this decision for the time being but the economic outlook remains troubling.

“The Bank will need to watch the economy closely and stand ready to act decisively if conditions continue to worsen.

“If the half-point cut from the Fed does not stimulate the US economy, there is risk of a coordinated global slowdown into next year.

“Under these circumstances, a quarter-point cut in the UK would not be sufficient and the MPC should be ready to make a more radical half-point reduction.”

Staffordshire Building Society says it&#39s delighted with today&#39s decision as it&#39s excellent news for all its variable rate savers as the society kept all of its savings rates unchanged throughout 2002.

Lyn Colloff, group secretary and marketing executive at the Staffordshire says: “We&#39re very conscious that savers outnumber borrowers by 7 to 1 and that many of our savers rely on their savings to supplement their income in their retirement.

“Obviously, there&#39s a significant cost to the Society in holding savings rates and offering very competitive discount and fixed mortgages rates. Every week this year we&#39ve at least one of our mortgage products in either local or national “Best Buy” tables so our borrowers have been getting a great deal from us.

“We shall keep our savings rates under review, but generally, we believe that savers are finding it very tough at the moment so we&#39ll be looking to hold our rates for savers as long as we possibly can.”

The last time the base rate sat below 4% was January 27 1955, when it stood at 3.50% for just under a month before increasing by 1% for the rest of the year.

And 1955 was the year that The Abbey National Building Society mortgage rate was 4.50 % – but only if you could get one. And in the same year &#39The Quarrymen&#39 had their first Liverpool gig, fronted by some bloke called John Lennon

The MPC&#39s latest inflation and output projections will appear in the Inflation Report to be published next Wednesday.

The minutes of the meeting will be published on November 20.

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