08/02/2002

UK interest rates remain on hold

Interest rates are on hold following the Bank of England's decision to keep the current level of interest at 4 per cent.

In a move which has been described as "disappointing but understandable" by the CBI, the Bank of England has decided not to implement any further rate cuts for the foreseeable future, although some analysts are predicting one further cut before rates trough.

The sound from the manufacturing sector was one of dismay at the news, representing as it does "a missed opportunity" to instil confidence in a sector struggling to find its feet amid the current economic instability.

Stephen Radley, Chief Economist at the Engineering Employers' Federation added: "With inflation so low and real interest rates relatively high, manufacturers will find it hard to understand the reluctance to countenance any further reductions in interest rates."

However, the Bank of England is currently faced with the difficult task of how best to balance consumer spending with industry underperformance, with Chief Economist at the British Chamber of Commerce, Ian Fletcher, stating: "With so much conflicting data and views o the economy, it is understandable members of the MPC should wish to sit on their hands."

Latest figures show UK manufacturing out falling at its fastest rate for over a decade, with potential redundancies reaching into the thousands during 2002 if the sector's recession is not adequately addressed by the government - with many calling for action to be taken to reduce the strength of sterling instead of using rate cuts to stimulate demand. (CL)

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