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Bank holds interest rates at 4.5%
The Bank of England has left interest rates unchanged at 4.5%. Cuts before Christmas are crucial says BRC
The Bank's August inflation comment criticised city commentators for getting swept away with confident predictions of a rate cut. The Bank has been caught out by the rapid slowdown in consumer spending and has to k
Howard Archer, chief economist at Global insight, said today's decision was one of the most predictable outcomes ever.
"The committee has made it clear that it is currently in no hurry to cut rates further. Indeed, some MPC members are clearly far from convinced that any further interest rate cuts will be needed as they believe growth is likely to pick up over the coming months and could add to inflationary pressures,"
"We are more pessimistic than the Bank of England about growth prospects, and believe that further below-trend expansion and a modestly softening labour market will increasingly alleviate underlying inflationary pressures, notwithstanding persistently strong oil prices.
"We still lean towards the view that there will be another 25 basis point interest rate cut to 4.25 per cent before the end of the year, although we accept that this could be delayed until early 2006."
BRC Director General, Kevin Hawkins said:
"The BRC is disappointed, but not surprised, the MPC did not take the opportunity to reduce interest rates today, in light of the continuing slow down in consumer spending. Last month's reduction, while welcome, is still going to take some months to work through to the consumer and have any positive effect. At least one further cut between now and Christmas is crucial if we are to see any change in the current underlying trend - not just in the interest of retailers, but also for the wider economy."
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