Interest rates stuck at 5% for August

The base rate has been left at 5% for August, with the Bank of England announcing that there will be no change for the month following last week’s Monetary Policy Committee meeting, where members once again battled to weigh up the risks of the slowing economy with the risks of rocketing inflation levels.

One economist said that nobody should have been surprised at the decision of members to keep rates on hold, stating: “It should not have come as surprise to anyone that, on balance, the bank felt it could do nothing but sit tight this month - a situation that is likely to prevail for a few more months.”

The British Chambers of Commerce was disappointed and concerned with the decision given the state of the economy, and said: “The MPC cannot ignore the fact that recession threats have worsened. While the near-term rise in inflation is unavoidable, it is also temporary as weaker growth would clearly push down inflation sharply next year. Limiting the threat of a major recession must be the priority.”

An official from the EEF added: “The MPC continues to be pulled in opposing directions by rising inflation and slowing growth. However, the balance of risk appears to be shifting more rapidly. A cut in interest rates may be needed sooner rather than later to prevent the economy from drifting towards recession.”