Market starts to think of cuts after rate freeze

The Bank of England&#39s Monetary Policy Committee voted to leave interest rates on hold at 4% last week.

There has been no change in base rates for nine months and some pundits say the next rate move could even be down.

John Cridland, deputy director-general of the CBI, says: “The right thing to do was nothing. There is little need for change with stockmarket declines, inflation at record lows and evidence that the recovery could be slower than was thought earlier in the year. In today&#39s difficult climate it&#39s no longer clear that the next move should be up.”

And Alison Cooley of Charcol adds: “After awaiting a base rate upswing, ironically we appear to be moving closer to a cut than a climb.”

The latest Nationwide figures show house prices increased by 2.5% in July. MPC members are known to be concerned about the annual rate of house price inflation, which has now hit 21%.

But Cooley says the committee could cut rates again without too much danger. She says: “A quarter point base rate cut would have little effect on the housing market There are early signs of a gradual cooling down in the market, especially towards the top end.”