08.04.2004

Bank of England holds base rate

The Bank of England (BoE) has held UK interest rates steady at four percent for the second month running today, after a two-day meeting which put markets on a knife-edge over whether rates would increase.

Analysts say that the BoE is now highly likely to raise rates by a quarter-point to 4.25 percent next month in order to cool soaring debt levels and booming house prices, though overall inflation remains well below the governments two percent target.

Financial markets reacted strongly to the decision, with sterling off half a cent against the dollar at US$1.8353 and UK interest rate futures up sharply.

The BoE made no statement to accompany its decision, even though the market had been almost evenly split between those who thought worries about rising consumer spending would force a move this month, and those who said that low inflation and weak manufacturing meant it could wait until May.