Bank of England to keep interest rates on hold
The Bank of England is set to relieve homeowners by keeping interest rates on hold this week, experts say.
The bank’s monetary policy committee (MPC) is likely to maintain base rates at 3.75% on Thursday, according to economists.
However, increasingly strong economic growth and few signs of a consumer spending slowdown mean rates will probably rise next month, some analysts said.
The committee voted by eight votes to one to keep rates on hold last month after raising them by 0.25% in November in a bid to control consumer debt and soaring house prices.
But its members warned that another rate increase “would be warranted at some point” if the UK economy continued to progress in line with expectations.
John Butler, of banking group HSBC, said little sign of any significant slowdown in the housing market or household debt meant the MPC may still raise rates next week.
But Mr Butler said the Treasury’s introduction last month of a new, looser inflation target was likely to prompt a rate hold.
A failure of official data to reflect figures last week showing the strongest manufacturing expansion since December 1999 also pointed to a delay, he said.
Philip Shaw, of investment banking group Investec, said he expected the committee to take no action this month.
But he added: “The background of increasingly strong growth looks set to result in rates rising again in February.”
Accountancy and business consultancy group BDO Stoy Hayward also tipped a base rate freeze due to weak consumer spending in the run-up to Christmas.
However, it said it believed spending would continue to fall, resulting in rates staying on hold for the first three months of 2004.
“With household purse strings predicted to tighten further, BDO Stoy Hayward expects interest rates to remain unchanged during the first quarter,” it said.
