RICS: Interest rates decision

Commenting on the Bank of England's decision not to cut interest rates, Simon Rubinsohn RICS chief economist said: "The RICS is disappointed that the MPC chose to leave the base rate on hold today. While the RICS appreciates the risks associated with the recent pick up in inflation and acknowledges the danger of it moving into 'letter writing' territory during the second half of the year, the tone of recent data and surveys suggest that the threat of a sharp slowdown in economic activity is the more pressing issue for the authorities. Housing transactions have collapsed, consumer confidence has sunk to its lowest level since 1992, the service sector appears close to stagnation according to the latest CIPS survey and the retail sector is under immense pressure. There is now a high probability of growth falling short of the Bank of England's expectations as set back in February. This will create the spare capacity to lower inflation in the medium term. Significantly, the latest report from the REC (Recruitment and Employment Confederation) highlights the threat to employment from the deteriorating economic climate. The RICS believes that the Bank needs to take further pre-emptive action over the coming months starting with the June meeting in an effort to decisively counter the impact of the credit crunch. The RICS believes that the Bank should cut the base rate to 4.5% in June if there is no improvement in the data over the next month.