Interest rates kept at 5% by bank

07 August 2008

Rates left steady for fourth month in a row

Interest rates have been left untouched again this month by the Bank of England as it tries to handle a slowdown in the economy and inflationary pressures.

According to BBC News, many reports have indicated that “the economy is heading for a significant slowdown or even a recession”.

However, the main aim of the Monetary Policy Committee (MPC) is to keep inflation at 2% and it is currently at 3.8%.

When deciding on interest rates last month, the majority of the MPC voted to keep rates steady at 5%, however, one voted for a reduction and one voted for an increase.

This caused some analysts to predict that rates would be increased this month to deal with rising inflation.

Lee Hopley, head of economic policy at EEF, a manufacturers group, said: “The MPC continues to be pulled in opposing directions by rising inflation and slowing growth.

“However, the balance of risk appears to be shifting more rapidly. A cut in interest rates may be needed sooner rather than later to prevent the economy from drifting towards recession,” he added.