Bank resists pressure to cut rates

The Bank of England ignored pleas to cut interest rates for the second month in a row this lunchtime, opting to leave rates at 5.5pc.

The Bank of England ignored pleas to cut interest rates for the second month in a row this lunchtime, opting to leave rates at 5.5pc.

Policymakers on the Bank's monetary policy committee held firm despite the ongoing 'credit crunch', a slowdown in consumer spending, an increase in the number of people struggling to meet their mortgage and loan commitments and gloomy news about gas and electricity prices.

Today's news promoted immediate calls for a cut in rates next month.

British Retail Consortium director-general Kevin Hawkins said: “This decision makes the need for a cut next month all the more pressing.

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“The worst Christmas sales growth for three years shows consumers and retailers are still feeling the effects of five previous rate rises as other bills continue to shoot up.

“While appreciating the decision was finely balanced, given the inflationary pressures facing the economy, 2008 is going to be tough for all customer-facing businesses.

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“The longer the Bank delays cutting rates again, the greater the risk of the economy heading in the wrong direction.”

Stephen Leonard, director of mortgages at Alliance & Leicester, said the news was not a shock, but it made it even more important that people looking for mortgages - particularly first-time buyers - fixed their borrowing rates.

He added: “A tracker mortgage is a good option for homeowners who are financially flexible and looking to take advantage of any further interest rate cuts during the next 12 months.”

Richard Snook, an economist at the Centre for Economics and Business Research, said: “This decision was generally expected, although weak consumer lending figures last week had raised the possibility of a January cut.

“The MPC decided to act prudently due to uncertainty over the strength of the consumer during the crucial Christmas retail period and the loosening of the money markets in the wake of last month's cut.

“Inflationary concerns will also have affected the Bank's decision, with oil touching $100 a barrel this month and electricity and gas suppliers passing on their rising costs to consumers.”

He added that he expected a quarter-point cut in rates next month.

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