Base rate stays the same for June
Earlier this month the Monetary Policy Committee met for its monthly meeting in order to discuss the base rate, and it was decided following the meeting that the base interest rate would be kept on hold at 5%. The base rate was last cut in April, following two earlier rate cuts. However, despite concerns over the slowing economy and the effects of the global credit crunch on consumer finance and confidence the Bank of England decided to focus more on rising inflation levels, thus deciding to keep the base rate at 5%.
There were mixed views from industry officials with regards to the decision to keep interest rates on hold, with some officials supporting the central bank’s decision and others stating that he bank is too focussed on inflation levels, which have soared to 3% – a fill 1% over the government’s target of 2%. One CBI official said: “The Bank had little option this month other than to leave interest rates on hold. Oil and commodity prices are still of great concern and businesses are having to raise prices as profit margins get squeezed further.”
The British Chambers of Commerce disagreed, and through that the Bank of England should have prioritised on the worsening economy rather than on inflation levels. An official from the BCC said: “We understand the critical need for the MPC to maintain credibility, but the MPC cannot disregard the worsening threats to growth. The necessity to write a letter to the chancellor should not be the overriding consideration for the MPC.”
However, the British Retail Consortium said that the central bank had been right to leave the base rate on hold, stating: “Struggling customers and retailers certainly need a boost but, with rising oil and commodity prices stoking inflation to well above the 2% target, leaving rates unchanged was the wise option.”
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