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Thursday, 8 March, 2001, 12:00 GMT
Interest rates left unchanged

The Bank of England has left interest rates unchanged at 5.75%.

The decision by the experts on the bank's Monetary Policy Committee had been widely predicted.

Against the backdrop of a responsible Budget and persistent undershooting of the inflation target business will grow quickly impatient if there are not further rate cuts in the months ahead

Chris Humphries
British Chambers of Commerce

In February they had cut UK interest rates by 0.25%.

But this time they decided not to slice them further despite continuing concerns about the economic slowdown in the US.

Bank Governor Sir Edward George had said the committee would not be afraid to move rates in the run-up to a general election.

But any such move would have been politically sensitive, not least because it might be interpreted as giving an instant verdict on Chancellor Gordon Brown's Budget.

Business welcome

Chris Humphries, director general at the British Chambers of Commerce said: "A pause today is disappointing but understandable, whilst the Bank reassesses the extent of the slowdown in the USA and impact the Budget has on business and consumer confidence.

"However, against the backdrop of a responsible Budget and persistent undershooting of the inflation target business will grow quickly impatient if there are not further rate cuts in the months ahead.

"The Budget offered no immediate help to boost business investment. The Bank must now deliver the benefits of the chancellor's responsible stance, by cutting rates sooner rather than later."

Governor of the Bank of England, Sir Edward George
Sir Edward George: Not afraid to make cuts

There continues to be a mixed picture of the health of the UK economy, with many analysts believing that the MPC could afford to wait before moving rates again

The Bank acted to cut rates last month on fears of a recession in the United States which would hurt exports and the profits of British firms.

That had prompted the US central bank, the Federal Reserve, to slash US interest rates by 1% to 5.5% in January.

And since the last MPC meeting, the economic data coming out of the US has continued to deteriorate, with consumer confidence and business spending falling further.

But, in contrast, economic conditions in the UK still appear good, with strong retail sales in February and unemployment hitting its lowest levels for two decades.

Those in favour of a further cut argued that there was room for a further interest rate cut now, not least because UK inflation has remained below the 2.5% inflation target for 22 months.

Many experts believe that interest rates will continue their downwards course later in the spring, if and when the General Election is safely out of the way.

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See also:

08 Feb 01 | Business
UK interest rates cut
08 Feb 01 | Business
Q&A: What interest rate cut means
21 Feb 01 | Business
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Who's Who at the MPC
14 Feb 01 | Business
Rate cut prospects rise
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