No change for interest rate

The Bank of England announced earlier this week that the base rate is to remain on hold at 5% for the month of June. Officials state that concerns over the rate of rising inflation have now overtaken concerns about the flagging economy, resulting in the decision to keep rates on hold for another month. The last rate cut was in April.

Although a number of economists had originally predicted that the next rate cut would come in June, inflation levels have been soaring recently pushed up by the cost of food and fuel. Therefore the decision to keep rates on hold has not come as a big surprise to most people, although officials state that MPC members would have faced a very tough decision.

Ian McCafferty, chief economic adviser to the employers’ group, the CBI, stated: “The Bank had little option this month other than to leave interest rates on hold. Oil and commodity prices are still of great concern and businesses are having to raise prices as profit margins get squeezed further.”

However, an official from the British Chambers of Commerce said: “We understand the critical need for the MPC to maintain credibility, but the MPC cannot disregard the worsening threats to growth. The necessity to write a letter to the chancellor should not be the overriding consideration for the MPC.”