Bank of England maintains interest rates at 5%

The Bank of England's Monetary Policy Committee today voted to maintain interest rates at 5%.

The previous change in Bank Rate was a reduction of 0.25 percentage points to 5.0% on 10 April.

Andrew Pipe, senior economic adviser, Lloyds TSB, commented: “Today's decision reflects the dilemma that the Bank of England has faced all year - the weakening economy argues in favour of lower rates, but rising inflation necessitates maintaining a tough stance.

“Figures published over the past month have almost universally shown economic growth declining more sharply than expected. But inflation was also worse than expected in June and the recent price hike by domestic energy suppliers means that it will continue to rise much further over the next few months.

“The MPC is likely to keep rates steady until it is fairly sure that the current rise in inflation is not becoming entrenched by feeding into higher wage growth.

“Unless the economy proves to be heading for recession within the next few months or inflation trends suddenly improve, the first rate cut is most likely to come in early 2009.”

Grant Bather spokesman from Virgin Money, commented: "The Monetary Policy Committee's decision to keep the Bank of England Base Rate at 5% should come as no surprise, but will do little to allay consumer fears. With continued bad news over the price of property and household bills coming at a time of well above target inflation for the UK, it is understandably difficult for the MPC to cut rates. Holding the rate at 5% was the best that consumers could hope for this time around."