Bank keeps interest rate at 5%

05 June 2008

Monetary Policy Committee (MPC) votes to leave base rate unchanged

The Bank of England Monetary Policy Committee (MPC) has voted to leave UK interest rates at 5%.

The decision was widely expected by experts in the field as concerns over inflation had been rife in recent weeks.

In April, inflation rose to 3% because of the steep rise in food and fuel prices. The government’s inflation target is just 2%.

Despite the increase in inflation, some called for a cut in interest rates this month because of falling house prices and the overall economic slowdown.

If the rate of inflation goes above 3% then the governor of the Bank of England, Mervyn King, will have to write to the Chancellor to explain why.

The decision has been widely supported.

“The Bank had little option this month other than to leave interest rates on hold,” said Ian McCafferty, chief economic adviser to the employers’ group, the CBI.

The British Retail Consortium (BRC) also supported this month’s decision by the MPC.

Stephen Robertson, director general of the BRC, said: “Struggling customers and retailers certainly need a boost but, with rising oil and commodity prices stoking inflation to well above the 2% target, leaving rates unchanged was the wise option.”