Economists welcome interest rate decision

Britain's economists have welcomed the Bank of England's decision to keep interest rates at 5.75%.

They say the UK economy is strong enough not to need a cut.

But business leaders say the Bank's caution is understandable, but disappointing.

Although many economists think a cut by June is likely, they say the Bank's Monetary Policy Committee needs more time to digest yesterday's Budget, which many found expansionary.

Halifax chief economist Adam Chester says: "The UK economy is still going strong in terms of domestic growth.

"The housing market is going strong, consumer spending is strong, so there's a danger that cutting interest rates now would overcook this."

Danny Gabay, UK chief economist at J P Morgan, adds that the signals from the United States, which may have been concerning the committee, now suggest that the American economy is not as weak as was first thought.

But union and business representatives are criticising the Bank's inertia.

Chris Humphries, director-general of the British Chambers of Commerce, says: "A pause today is disappointing, but understandable, whilst the Bank reassesses the extent of the slowdown in the USA and the impact the Budget has on business and consumer confidence."

He adds: "The Budget offered no immediate help to boost business investment. The Bank must now deliver the benefits of the Chancellor's responsible stance by cutting rates sooner rather than later. "

TUC, general Secretary John Monks agrees, saying: "This is very disappointing, especially following a Budget which offered no excuse for further delay.

"Rate cuts are essential if UK industry is to be given renewed confidence to invest in the future, reduce borrowing costs, and bring the pound down to a more competitive level."