Bank of England holds UK interest rate at 4%

The Bank of England has held the main UK interest rate at 4% for the twelfth consecutive month.

This is despite a larger than anticipated cut by the US Federal Reserve. Leading economists were split on whether or not interest rates would or should be dropped. Many of those in favour of an interest rate cut were looking to the US market for a drop which might have heralded a cut in the UK rate.

However, despite the US Federal Reserve's decision to cut interest rate by half a percentage point, taking the interest rate to 1.25% in a bid to firm up a weak recovery in the US economy, the UK's Monetary Policy Committee (MPC) were unimpressed with the arguments for a rate cut.

Next week the MPC is expected to publish projections on inflation over the next two years, and the decision to hold the interest rate at 4% is being interpreted as an indication that the MPC think that inflation may rise to near the 2.5% target inside the two-year period.

However, with the manufacturing sector continuing to be hit by the relatively high UK interest rate, the Engineering Employers Federation called for a UK rate cut. Opposed to this the retail sector indicates that there is no pressing need to cut rates as the twin-track UK economy displays healthy retail sales figures for October.

One of the main fears about an interest rate cut is that this may seriously overheat the runaway property sector. House price inflation recently topped 24% to reach its highest level since the 1980's boom, which resulted in negative equity problems for many when prices slumped in a housing market rationalisation.


Related Northern Ireland Business News Stories
Click here for the latest headlines.

04 September 2001
Bank likely to leave interest rate unchanged
The Monetary Policy Committee (MPC) of the Bank of England are likely to leave interest rates unchanged at 5 per cent. The Committee are due to begin their latest two-day meeting amid a spate of calls for another cut in the interest rate.
28 November 2019
Black Friday: NI Shoppers Among Highest UK Spenders
Shoppers in Northern Ireland are the UK's second-highest spenders on Black Friday, according to research from PwC. As bargain hunters take to the shops, they are planning to spend around 35% more than last year, an average of £183. The average increase across the UK is 11% or £224.
14 August 2001
Inflation rate fall may herald a further interest rate cut
Speculation is growing that a fall in the underlying inflation rate, down to 2.2 per cent, may give the Bank of England’s Monetary Policy Committee further room for manoeuvre to lower interest rates. Continued severe pressure on manufacturing industry has prompted further calls from industry leaders seeking another cut in the UK interest rate.
08 January 2004
UK Interest rates sticks at 3.75%
As expected, the Bank of England has decided to hold the base rate at 3.75% today. The Bank's Monetary Policy Committee (MPC) opted to hold the rate following a quarter point rise in December - the first rise in four years. However, analysts are continuing to warn consumers that rises are imminent in the year ahead.
04 October 2001
UK interest rate receives further cut
The UK interest rate has been cut for the sixth time as economies around the world attempt to stem the effects of the current global climate of uncertainty. On Thursday October 4, the Bank of England’s Monetary Policy Committee announced a further 0.25 per cent cut, a move which brings the UK base rate down to 4.