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Last Updated: Thursday, 9 February 2006, 12:00 GMT
Bank leaves rates on hold again
Base rate graph
UK interest rates have been left on hold again at 4.5% following the Bank of England's two-day meeting, despite signs of slowing High Street sales.

The Bank's Monetary Policy Committee (MPC) is believed to have based its decision on signs of a sustained recovery in the housing market.

However, some economists expect the MPC to make a rate cut later this year - possibly in the spring.

The last time rates were cut was in August 2005, when they fell 0.25%.

"The Bank has chosen to follow a steady course. This is particularly understandable given current mixed economic signals," said Ian McCafferty, chief economic adviser at the CBI.

"The MPC should stay alert to further weaknesses in the economy and must remain on standby to cut rates over the coming months."

'Difficult choices'

The Bank's vote to keep rates on hold is likely to disappoint UK manufacturers, still smarting from official figures showing that output fell last year for the third time in five years.

Meanwhile, recent figures from the British Retail Consortium (BRC) showed like-for-like sales on the High Street up just 0.2% in January, the weakest start to a year for retailers for over a decade.

We urge the MPC to consider early action
David Frost, BCC

"We understand that the MPC faces difficult choices. Waiting too long before taking corrective action could, however, be dangerous," said David Frost, director general of the British Chambers of Commerce (BCC).

"There is a clear risk that the upward trend in unemployment would accelerate. We urge the MPC to consider early action."

Economists believe the Bank is waiting for details of the latest pay round together with revised inflation and growth forecasts, due to be published next week, before making any move.

"Next week brings the BoE quarterly inflation report and this has huge influence on any potential base rate move," said Ray Boulger of mortgage adviser John Charcol.

"Despite earlier hopes of a cut this month a 'no change' decision was widely expected. However, we firmly believe the trend is still downwards and therefore this is a cut 'deferred', not a change of heart."

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