MPC keep rates at five pc

The Bank of England's Monetary Policy Committee (MPC) has decided once again to fix UK base rates at five per cent.

The Bank of England's Monetary Policy Committee (MPC) has decided once again to fix UK base rates at five per cent.

Despite many warnings concerning the onset of a slowing economy and the possibility of a recession the MPC has kept rates high in order to lower the level of inflation, currently at 3.8 per cent.

The news will displease property owners hoping for a quick sale over the summer, as buyers will be put of signing a mortgage with rates so high, and businesses struggling with the credit crunch will face more problems connected to a lack of consumer confidence.

However, the MPC seems to have decided that it is inflation, and not the immediate economy, that is the most important factor for the UK, and so the decision to keep rates high will be aimed at slowing consumer spending enough to correct the rate of inflation now double that of the government's target.

Hetal Mehta, senior economic advisor to the Ernst & Young Item Club said: "It should not have come as surprise to anyone that, on balance, the bank felt it could do nothing but sit tight this month - a situation that is likely to prevail for a few more months."