No change in the base rate for May

Many households and industry sectors were disappointed earlier this week when the Bank of England announced that interest rates were being left on hold at 5%. However, the decision to leave rates static came as no surprise to most, as many had thought it unlikely that the central bank would reduce rates again having cut them by 0.255% in April. Most industry officials are now expecting another rate cut in June.

One economist stated: ‘Today’s vote was probably very close given the conflicting indicators on the economy and inflation. Although the hawks appear to have won the day this time, the doves will have had plenty to argue about.’ Officials state that the Monetary Policy Committee has to consider both rising inflation levels and a slowing economy when setting rates, which makes the decision a tough one.

Another leading economist said: ‘Current elevated inflation levels and risks deterred the MPC from cutting interest rates for a second successive month despite mounting signs that the UK economic slowdown is deepening and widening amid tighter lending conditions.’

He added: ‘It seems odds-on that the Bank of England will trim interest rates from 5.00% to 4.75% in June, thereby maintaining the trend of cutting by 25 basis points every two months.’

An official from the EEF said: “The economy has been through a series of shocks since the credit crisis hit last summer and the Bank has been right so far in responding with a measured approach on rates. However, despite concerns on inflation, further cuts to interest rates are needed to prevent the economy from drifting towards recession.”

Recent additions:

•  Report indicated repossessions could rocket this year
• Fall of 7% in mortgage lending for February
• Houses prices fell for sixth consecutive month in March
• Officials say panic over mortgages blown out of proportion

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