Interest rates still at 5%
Following its recent monthly meeting earlier this month the Monetary Policy Committee has decided to keep the base rate on hold at 5%, despite problems with the slowing economy. Many homeowners paying variable rate mortgages and many industry groups have been disappointed with the decision, but others have said that with inflation levels soaring out of control the Bank of England and the MPC had little choice other than to leave rates on hold for the fifth month in a row.
However, a number of industry groups have said that the country is likely to slide into recession by the end of this year, and many say that this will result in a loan rate cut either later this year or early next year. The second quarter of this year saw economic growth come to a standstill, and the nation is set to experience two negative quarters of growth before the end of the year, which means that it will have gone into recession.
Following the latest announcement after the last MPC meeting one official stated: “This is a depressing decision. A cut today would have offered hope to all those who fear for their jobs and homes, and helped cut through the economic pessimism that is now doing as much damage as the credit card crunch and energy prices.”
Another official stated: “All good things come to an end, and, unfortunately, UK growth is no exception. After the economy broke its astonishing winning streak of 15 years of continuous growth this summer, the next UK rate move will almost certainly be down. But not just yet. The MPC looks set to keep rates on hold until it is unambiguously clear that inflation has passed its peak - and that probably won’t happen until early in 2009.”
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