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Interest rates held at 5%

The Bank of England held UK interest rates at 5% this week for the third consecutive month.

The Monetary Policy Committee announcement follows a turbulent week which has seen worries of a recession increase and building firms such as Taylor Wimpey and Newcastle-based Barratt announce hundreds of job losses.

Economic experts had predicted rates would remain unchanged after inflation hit 3.3% last month. Interest rates were last cut in April by a quarter of a per cent from 5.25%.

Ross Smith, head of policy and research at the North East Chamber of Commerce, said: “The decision came as no great surprise to businesses around the region. With rising oil and commodity prices, Mervyn King has argued for restraint until prices settle.

“It is evident for all to see that businesses are under the same price pressures as households and yet the latest NECC North East Business Barometer showed that the North East economy is benefiting from its strong exporting pedigree and a further rate cut would assist firms operating on the global stage.

“In the face of flagging consumer and market confidence it is necessary that steps are taken to support the economy and to generate confidence.”

Steven Marks, lending executive at Newcastle Building Society, said: “The MPC has to balance the conflicting pressures of increasing inflation with a slowing economy and falling house prices, and we fully expected that rates would therefore be left on hold this month.

“The outlook for interest rates has become increasingly uncertain over the last few months, as inflationary pressures have continued to mount - it is now difficult to envisage any further cuts in the short term, and there is indeed a possibility that the next rate change will be a rise.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .