UK interest rates held at 5.75%

The Bank of England today voted to maintain interest rates at 5.75%.

The previous change in Bank Rate was an increase of 0.25 percentage points to 5.75% on 5 July 2007.

Barry Naisbitt, Abbey's Chief Economist, comments: "The Bank of England held rates at 5.75% today.

“Financial markets were expecting this decision, especially after the strong GDP figures for the third quarter. However, market commentators are expecting the Monetary Policy Committee (MPC) to move towards cutting rates soon. The Inflation Report, to be published on the 14th November, should give some key insights into how the MPC members view the possible implications of recent events for the economy and interest rates.

“While the balance of recent incoming economic activity data has continued to be strong, there are signs that the rate rises we have seen are having an effect. Inflation has fallen to 1.8% and the uncertainty created by the turmoil in global financial markets could dampen activity growth, particularly in the US. As a result, the focus of a few months ago of the possibility of higher rates has changed to the discussion of when rates will be cut. I expect that the MPC will want to see more evidence on how the economic picture is developing before deciding to act.”

Stephen Leonard, Director of Mortgages at Alliance & Leicester, said: "Today's announcement to maintain interest rates at 5.75% was widely expected. The decision reflects continued concerns that recent record oil prices, strong wage growth and a relatively healthy economy will continue to exert upward pressure on inflation.

“Borrowers looking to buy for the first time, or take out a bigger mortgage, should continue to consider a fixed-rate deal, as this will help give them the security of flat monthly payments. A tracker mortgage is also a sound option for those borrowers who are looking to benefit from the consensus view of interest rate cuts over the next 12 months"

Trevor Williams, chief economist Lloyds TSB Corporate Markets said: “Although it is true that economic growth may have peaked in the last quarter and is slowing in the current one, there is still some way to go before the MPC would need to wield the knife on base rates. And with money supply still growing, strong labour market conditions and continuing robust economic growth, today was clearly not the day for a cut. Equally, with early signs that the economy is set to weaken in 2008 and price inflation still comfortably below target, the Bank was never really likely to raise rates. The next move will almost certainly be down, but it’s safe to say there won’t be any change until February at the earliest.”