Bank rejects pleas for interest rate cut

BANK of England policymakers today left interest rates on hold at 5.5% - rejecting pleas for a further cut in the cost of borrowing.

BANK of England policymakers today left interest rates on hold at 5.5% - rejecting pleas for a further cut in the cost of borrowing.

The bank's Monetary Policy Committee, which trimmed the base rate by 0.25% in a surprise move last month, rejected demands for a back-to-back cut in the wake of a slump in consumer spending.

Retailers have been leading the calls for a further reduction following poor Christmas trading for major names such as Marks & Spencer, Next and Currys and PC World owner DSG International. Some had even called for a 0.5% cut.

David Kern, economic adviser to the British Chambers of Commerce, said: “The decision is disappointing but not surprising. The MPC missed an important opportunity to underpin confidence and limit the damage to the economy.


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“A modest interest rate cut would have alleviated the threats to the banking system and would have helped restore the smooth flow of credit in the economy.

“Sterling's recent weakness poses inflationary risks but delaying unduly a modest and much-needed interest rate cut could worsen the downturn in the economy, triggering bigger and more dangerous falls in the pound.

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“To minimise the threats, we strongly urge the MPC to cut interest rates in February.”

Kevin Hawkins, director general of the British Retail Consortium, added: “The worst Christmas sales growth for three years shows consumers and retailers are still feeling the effects of five previous rate rises as other bills continue to shoot up.

“The longer the bank delays cutting rates again, the greater the risk of the economy heading in the wrong direction.”

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