Interest rates 'to stay on hold'

Interest rates have been on hold since August

The Bank of England is widely expected to announce that it is keeping UK interest rates on hold at 4.5% at the end of its latest rate-setting meeting.

Such a decision by the Bank's nine-member Monetary Policy Committee (MPC) would leave rates unchanged for the seventh month in succession.

Economists point to the fact that the Bank said last month inflation was holding steady at about 2%.

Bank officials also pointed to a gradual recovery in the housing market.

However, the lack of an interest rate cut will disappoint the struggling retail sector.

Recent figures from the British Retail Consortium showed a subdued trend on the High Street, with like-for-like sales up just 0.6% in February following weak January sales.

'Strong endorsement'

The close proximity of Gordon Brown's latest annual budget on 22 March is also thought to be a factor in the bank wishing to keep rates on hold.

We now expect rates to remain on hold at 4.5% for the remainder of the year Philip Shaw, analyst

"Last month's inflation report ... (was) about as strong an endorsement of steady rates as one is likely to see," said Investec analyst Philip Shaw.

"The balance of news has turned around significantly over the past month and we now expect rates to remain on hold at 4.5% for the remainder of the year."

If rates do remain on hold this month it would be the longest period of interest rate stability since the MPC was formed in 1997.

In February, MPC members voted 8-1 in favour of keeping rates on hold.

Capital Economics economist Jonathan Loynes said there was no indication from the minutes of the meeting that the eight members in favour of keeping rates on hold "even seriously considered the case for lower rates".

The last three meetings have seen Stephen Nickell vote in favour of a cut to 4.25%, but so far he has failed to garner the support of fellow MPC members.