BBC Home
Explore the BBC
BBC News
Launch consoleBBC NEWS CHANNEL
Last Updated: Thursday, 5 June, 2003, 12:04 GMT 13:04 UK
UK interest rates kept on hold
Sir Edward outside the Bank of England
Sir Edward is stepping down after ten years
The cost of borrowing remains unchanged at 3.75% following the last Bank of England interest rate meeting to be chaired by Sir Edward George.

Despite pressure from some industry leaders, and worries over the continuing slump in UK manufacturing, the Bank's Monetary Policy Committee (MPC) voted not to reduce rates from their lowest level since 1955.

Some economists fear that lower borrowing rates will fuel an unsustainable house price boom.

The committee's decision will also have been influenced by recent signs of recovery in the UK economy as a whole.

In the last week, the CBI has reported a jump in demand in the retail sector, and encouraging figures for the important service sector have been published.

Sir Edward George
One of his longest lasting legacies will be the transparent and informal way that the MPC works
DeAnne Julius
Former committee member

The manufacturing sector remains in recession, even though the weaker pound makes British goods more attractive to the European market.

The decision to keep rates unchanged was criticised by unions and some business leaders.

Ian Brinkley, senior economist at the TUC, said: "UK manufacturers will be disappointed. With so much economic uncertainty across the world, a cut now would have given industry more confidence to invest."

British Chambers of Commerce director-general David Frost said: "Inflation may be hovering about its target but sales in most sectors are relatively weak.

Call for cut

"The value of the pound may be falling, but considering the eurozone's economic performance, Britain's exports may not see a rapid improvement in sales."

The Chambers has joined calls from business groups for a cut in interest rates while output growth is weak and sales are under control.

Eurozone rates
Interest rates in the eurozone have been slashed to a record low of 2%

Ian McCafferty, CBI chief economic adviser, said: "This would have been a timely moment to give the economy a helping hand.

"There is little hard evidence that the recovery is gathering sufficient momentum. Sterling seems to have stabilised after its sharp fall last month and in the current economic climate there is no risk of significant pressure on inflation.

"Business will now hope for a rate cut next month to drive the economy out of this sluggish spell."

Bank of England deputy Mervyn King will take over from Sir Edward as governor at the end of June.

The BBC's Jenny Scott
"Inflation is still above it's target"

The BBC is not responsible for the content of external internet sites


News Front Page | World | UK | England | Northern Ireland | Scotland | Wales | Politics
Business | Entertainment | Science/Nature | Technology | Health | Education
Have Your Say | Magazine | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific