The Property Adviser: Bank of England keeps interest rates at 5%

11 July 2008

Bank of England keeps interest rates at 5%

The Bank of England’s Monetary Policy Committee (MPC) decided yesterday (10 July 2008) to keep interest rates on hold at 5% in order to balance growing evidence of an economic slowdown against the problem of rising inflation.

Graeme Leach, chief economist at the Institute of Directors, said: "If the MPC reduces interest rates, it risks losing control of inflation. Conversely, if it increases interest rates it risks losing control of growth and could trigger a recession."

The MPC’s decision caused a lot of reactions. Amongst them, Ray Boulger, mortgage adviser from John Charcol, said: "With the economic news from nearly all sectors of the economy getting worse by the day, a rate cut is badly needed to help restore some confidence to consumers and reduce the financial pressure on both them and industry."

In April 2008 the MPC cut the base rate of interest by 0.25% - down from 5.25% to 5%. This followed a similar cut, from 5.5% to 5.25%, in February 2008.
Many experts expect interest rates to remain at 5% for the rest of the year.