JUNE 2008
The Bank of England today spurned pleas for a new cut in interest rates to shore up the faltering economy and slumping housing market and held them at 5 per cent.
The harsh noon verdict from the Bank’s rate-setting Monetary Policy Committee (MPC) dealt a fresh blow to hard-pressed households and businesses, fearful of rapidly worsening economic prospects and struggling with mounting financial strains.
The Bank’s tough decision to keep rates pegged for a second month in a row came as it stuck to its recent hard line that it must prioritise its battle to tame rising inflation, stoked by soaring food and fuel prices.
The MPC had been widely expected by the City to rebuff the growing clamour for a fresh cut in official base rates after it forecast last month that headline consumer price inflation will rise over the summer to almost 4 per cent, as food and energy costs continue their upward charge.
In the latest challenge to Alistair Darling’s prediction that the economy will rebound strongly next year from only a modest slowdown in coming months, the OECD forecast that growth in 2009 will be even weaker than this year, at just 1.4 per cent. That compares with the Chancellor’s bet that growth will bounce back to rise by between 2.25 and 2.75 per cent next year, from his expected minimum of 1.75 per cent for this year.
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