The Bank of England has today frozen the UK interest rate at 4.75%.
The rate hold was expected by most industry pundits and has been welcomed.
John Cridland, deputy director-general of the CBI, says: “The Bank was right to leave well alone this month. Interest rates must be held until confidence returns to the economy.
“Consumers are extra cautious in the run-up to Christmas this year. Profitability is under pressure across all sectors and there is an unusual amount of uncertainty about future prospects for global oil prices, the US dollar and UK house prices.”
And Ray Boulger, senior technical manager at Charcol, says there is now little remaining doubt that base rates have now peaked. He predicts a rate cut in the first half of next year.
He says: “Looking forward to the first quarter of 2005, the MPC will have to increasingly consider the risk of the Consumer Price Index, currently at 1.2%, falling below the 1-3% target range set by the chancellor.
“Mervyn King will obviously not relish the thought of being the first governor to have to write to the chancellor to explain why he has allowed the CPI to fall outside his target range.
“However, the oil price is now over 20% off its recent peak, the weak dollar is depressing import prices and retail sales are sufficiently slow to persuade many retailers to make pre Christmas price reductions.
“This all adds up to downward pressure on the CPI, increasing the likelihood of a base rate cut earlier than is generally expected.”