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Last Updated: Thursday, 4 October 2007, 11:00 GMT 12:00 UK
No change for UK interest rates
Base interest rate
The Bank of England has decided to keep UK interest rates on hold at 5.75% for October, as widely expected.

Economists say the Bank is adopting a "wait-and-see" policy on rates until a clearer picture emerges of the effects of the recent global credit squeeze.

This is despite some calls for a rates cut to counter an expected slight economic slowdown in the UK next year.

The Bank also kept rates on hold last month, but that was before the Northern Rock crisis emerged.

The Newcastle-based lender had to secure emergency funds from the Bank after the downturn in the global credit market.

With the problems in the global credit market making it more expensive for commercial banks to lend and borrow from each other, a rate cut would have helped to ease this situation.

A rate reduction would also have helped UK homeowners who have seen mortgage rates increase this year.

Inflationary concerns

But the Bank also has to guard against inflationary pressures building in the economy.

What's not in doubt is that the next move will be down
Ian McCafferty, CBI chief economic adviser

Despite the most recent UK inflation data showing a fall in August, Global Insight chief economist Howard Archer said the Bank was likely to have been wary of the current high oil prices and the higher cost of food.

UK inflation, as measured by the government's preferred Consumer Price Index, fell to 1.8% in August. This was its lowest level in more than a year and below the government's 2% target.

"An interest rate cut was unlikely this month as there are, as yet, few signs of any serious damage to the real economy from the upheaval in the money markets," said CBI chief economic adviser Ian McCafferty.

"What's not in doubt is that the next move will be down."

The British Chambers of Commerce (BCC) said it wanted to see a rate cut in November.

"Following the Northern Rock crisis, the Bank of England must restore its credibility and authority," said BCC economic adviser David Kern.

"It must show greater sensitivity to the problems of the wider economy, while at the same time making it clear that it will not yield to outside pressures."

The Bank last changed interest rates in July, when they rose from 5.5% to 5.75%.

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