Bank of England Keeps Rates At 5.75%

By Stewart Douglas

The Bank of England met today prior to announcing its decision to maintain interest rates throughout the UK at 5.75% for the coming month.

In the widely anticipated move, the monetary policy committee of the Bank of England, fronted by Chairman Mervyn King, voted unanimously to maintain rates at their current level of 5.75%, in order to allow externalities to settle down before choosing their next move.

With inflation apparently in order, coming in within the government’s official target of 2% at last indication, and the economy seeming to be under control, the Bank of England have decided to hold rates to allow the current global situation to die down.

However, analysts were surprised by the move to release a statement which followed the Bank’s decision - actions normally reserved only for a change in rate policy, suggesting the perceived gravity of today’s decision.

The statement released covered the fact that the monetary policy committee had considered the wider impact of the credit crunch, and the potential knock-on effect this could have on inflation.

Interest rates have remained at 5.75% since they were raised from 5.5% in July, after four other rises prior to that during this year, which have led many home owners to feel the heat when repaying on variable mortgages.

Analysts had earlier forecast rates would rise to 6% by the end of the year.  However, with the sub-prime sector increasing in exposure, and with the extent of the problem still far from definitive, markets have been thrown into turmoil and central banks forced to exercise prudence to protect domestic economic affairs.

Depending on the outcome of the global situation, including the credit crunch and sub-prime crisis, analysts are predicting that the bank could still raise rates if inflation proves problematic later in the year.