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Last Updated: Thursday, 6 April 2006, 11:55 GMT 12:55 UK
UK interest rates remain at 4.5%
Bank of England
Only eight members of the MPC met this month
The Bank of England has kept UK interest rates on hold at 4.5% for the eighth month in a row.

The decision by the Bank's Monetary Policy Committee (MPC) had been widely predicted by economists.

Many analysts are now saying that UK interest rates are likely to remain where they are for the rest of 2006.

The Bank will be reluctant to make any changes, experts say, with inflation close to its target and economic growth forecast to pick up.

"We fully anticipate that rates will remain on hold for the rest of this year," said David Page, economist at Investec.

Growth 'risks'

The Bank's decision had been widely expected after the past few MPC meetings had seen the committee vote 8-1 in favour of no change, with only Stephen Nickell voting for a rate cut.

"The current debate on interest rates is conspicuous by its lack of controversy, and we continue to see little justification for interest rates to move in either direction," said Emily Earl, senior economist at the EEF business group.

Interest rate graph

However, the British Chambers of Commerce (BCC) said the Bank should be prepared to take swift action when necessary.

"We strongly urge the MPC to maintain a flexible stance," said BCC director general David Frost.

"Most analysts, and the Bank of England's own comments, acknowledge the risks to economic growth."

The CBI business organisation said that it was "disappointed" that rates were not cut.

"We think there's room for a small cut and look to the Bank to do so if there's no sign of a pick-up in momentum in the economy," said Ian McCafferty, the CBI's chief economic adviser.

Inflation threat?

In its latest quarterly forecast, the Bank of England predicted that economic growth would recover in the UK, while inflation would remain around the 2% target.

Consumer price index (CPI) inflation was at 2% in February, having risen from 1.9% the month before.

Recent indicators about the strength of the UK economy have been mixed.

On Wednesday, official figures showed a surprise fall in manufacturing output during February, while a separate study from the Chartered Institute of Purchasing and Supply (CIPS) found that activity in the service sector was cooling.

However, analysts have also noted that recent rises in utility bills could stoke inflation, and the latest house price surveys have suggested that the housing market is picking up steam once again.

April's meeting saw only eight members of the MPC gather, instead of the usual nine. Former member Richard Lambert has now stepped down, to become director general at the CBI.


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