UK MPC Hold Rates At 9-0

By Stewart Douglas

The Bank of England voted unanimously to hold rates at 5.75% in September, according to the minutes of the meeting of Monetary Policy Committee which were released today.

The minutes of the meeting showed that members were in no doubt as to the immediate future of interest rates in light of recent external disruption from the stock market and the tightening world credit climate, with holding at present rates the only viable course of action.

The minutes also showed that the bank considered the threat of inflation to have died down somewhat off the back of successive interest rate rises over the course of the year, with the most recent figures suggesting a fall back to 1.8% in August - well within the government’s safety zone.

The general attitude at the meeting as regards the health of the economy was still a ‘wait and see’, looking for more time to decipher the full extent of the sub-prime lending fallout and its impact on the domestic markets, and wider economy indirectly.

The minutes were released just a day after the US Federal Reserve announced its decision to knock interest rates down to 4.75% in order to inject some life into the flailing property market, and help ease some of the credit worries that had spread from within the US further afield.

Analysts have now begun to suggest that, pending the eventual outcome of the sub-prime situation, UK interest rates may actually fall as soon as the end of this year, despite previous predictions that they would almost inevitably rise to  6.00% by the end of this calendar year.

A small cut in interest rates would help ease some of the domestic pressure on mortgages, as well as provide some respite from the wider economic problems to small businesses nationwide.