| UK
Interest Rate: 5.25%
UK
Interest Rates Forecast: Cut to 5% possible in May
Bank
of England Holds Rates in March
The
Bank of England's Monetary Policy Committee has left interest
rates unchanged at 5.25%, following its monthly
meeting on Thursday this week.
The
decision was widely expected, despite the continuing weakening
of the UK housing market and ongoing
high credit costs.
The
reasoning and voting behind the MPC's decision is not
yet known - the minutes of the meeting won't be published
until the 19th March. However, strong inflationary pressures
are expected to have played a significant role in the
decision.
This
week, the Chartered Institute of Purchasing and Supply
released figures showing that prices of UK-manufactured
goods rose in February 2008 at their fastest rate since
the CIPS survey began, in 1999.
The
pound is also weakening against the Euro, causing the
cost of imports from Europe to rise - although this does
benefit UK companies exporting to Europe.
Set
against these factors, which support the 'no change' decision,
is the weakening housing market. Both Halifax and Nationwide
reported a fall in average house prices in February -
but the MPC have made it clear in the past that their
role is to control inflation - and not to protect homeowners
from falling house price values.
What's
Next for Interest Rates?
Many
analysts think that May might be the most likely date
for the next cut in interest rates -
speaking to the BBC, Stuart Porteous of RBS said that
"We expect one more rate cut this year, most likely
in May, unless economic conditions weaken substantially."
Also
speaking to the BBC, Graeme Leach, Chief Economist of
the Institute of Directors, agreed with the Bank's decision:
"The last thing the economy needs is for an overly
aggressive easing in policy now, which has to be reversed
later in the year."
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