Bank freezes interest rates

The Bank of England has today frozen interest rates at 4.5 per cent for October.

12:14 06 October 2005

The Bank of England has today frozen interest rates at 4.5 per cent for October.

The Bank's interest rate setting Monetary Policy Committee (MPC) has held the underlying cost of borrowing in the UK the second month in a row following August's cut.

Analysts have widely anticipated the freeze with Global Insight's Howard Archer describing the rates freeze as a "nailed-on certainty" yesterday.

The Bank raises and lowers the cost of borrowing in the UK in an attempt to keep inflation as close as possible to its target of two per cent.

Recently inflation has increased above this target - but the MPC blames rising fuel prices for this and believes it will drop back down naturally once fuel prices level off.

As such, retreating consumer spending is currently concerning economists more than inflation - prompting their belief that another cut in interest rates is on the cards.

Mr Archer noted: "We continue to believe that the Bank of England is too optimistic about future growth; and perhaps significantly [MPC members] Stephen Nickell, David Walton and Richard Lambert have all acknowledged recently that there are serious downside risks to the central bank's growth forecast, particularly stemming from persistently subdued consumer spending."

He believes another rate cut could happen as soon as November, but that it may well be delayed until the early part of 2006.