Britain keeps interest rate at 4%

BRITISH interest rates were left unchanged at 4% yesterday as the Bank of England put sterling’s strength ahead of concerns over a runaway housing market.

But most observers remained convinced that rates would rise next month. Financial markets reacted to yesterday’s meeting of the bank's Monetary Policy Committee (MPC) by selling sterling, which had been near its highest level against the euro in over a year. Sterling slipped by half a cent against the dollar and was also weaker against the euro at 66.14p.

The market for forward interest rates, which allow borrowers to fix an interest rate months in advance of drawing down loans, reflected a general view that the bank would raise rates by 0.5% before the end of June and a full 1% by the end of the year. The bank will not release minutes of yesterday’s meeting until April 21, but analysts said the decision was likely to have been close, with a number of MPC members arguing in favour of a rate rise. This would have marked a change from the committee’s March meeting, when all members voted in favour of keeping rates on hold.