Thursday, September 10, 1998 Published at 18:04 GMT 19:04 UK
Business: The Economy
Bank ignores rate pleas
Interest rates may have peaked, but have not fallen yet
The Bank of England's Monetary Policy Committee has decided to leave interest rates on hold at 7.5%, angering Union and business leaders.
The move came despite growing evidence that the UK economy is slowing down and new research showing that high street sales have come to a standstill.
Although a surprise rate cut in Japan on Wednesday, and hints over the weekend that the US central bank might be loosening its anti-inflationary stance, led to optimism that rates in the UK would have to come down fairly soon.
But he said the longer rates stayed at their current level, the sharper they would fall when the cuts were announced.
Since taking over power of setting the cost of borrowing in June last year, the MPC has increased interest rates five times - from 6.25% to 7.5%.
Decision 'bitterly disappointing'
The decision was made despite calls from UK industry calls for a rate cut to save it from recession and predictions from the TUC that unemployment will rise by almost a quarter of a million by the end of next year.
"Our concern is that business will have to continue to endure the slow torture caused by the combination of high interest rates, a strong pound and economic turmoil abroad.
"There must be a constructive review of the composition and terms of reference of the Monetary Policy Committee as soon as possible to restore business confidence in the management of the economy."
Ken Jackson of the Engineering Union said: "We have seen this week that thousands of jobs are at risk in manufacturing and the Bank of England Monetary Policy Committee decides to do nothing but sit and dither while people's livelihoods are at risk."
Tim Melville-Ross, director general of the Institute of Directors, said he was also disappointed.
The decision comes on the day that the Confederation of British Industry said High Street sales growth came to a standstill last month for the first time in almost three years.
Retailers have had to slash prices during the summer sales to attract shoppers worried by job cuts across the country.
The effects have also been felt by home owners with rates rises adding a total of around £50 a month to an average £60,000 mortgage.
Fears are now rising that the UK economy is poised for recession.
Manufacturing confidence in the Midlands region - the heart of UK manufacturing - is at a record low, the Birmingham Chamber of Commerce and Industry said on Wednesday.
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