UK interest rate freeze 'likely to continue'
The Bank of England is set to freeze interest rates for the eighth month in a row this week, economists say.
Weak consumer spending figures and falls in house prices are likely to persuade the Bank’s Monetary Policy Committee (MPC) to keep rates on hold at 4.75%.
The freeze represents yet another reprieve for homeowners from higher borrowing costs since the last rate rise in August.
The Bank warned earlier this year that another rate rise might be needed to keep inflation in line with Chancellor Gordon Brown’s target.
However, slow retail sales growth in February and the largest monthly fall in house prices for a decade look set to persuade members against a hike this month, analysts said.
Capital Economics said most forecasters still expected at least one more rise in interest rates in this cycle.
But it said: “The soft tone of recent data has led to a unanimous expectation of no change this week – just as it did in February and March.”
Simon Rubinsohn at Gerrard said recent data showed there was little sign of a pick-up in high street activity and the most recent Nationwide house price report also indicated that the MPC was likely to take no action this week.
“Reflecting these developments, the prospect of a tightening in policy in May has receded,” he added.
Chief economist at Barclays Global Investors, Haydn Davies, said interest rates were still very low by historical standards and would need to rise at some point if inflation was to remain subdued.
“However, the continued downturn on UK high streets warrants keeping interest rates unchanged for the time being,” he said.
