UK interest rate frozen because of economic uncertainty

Uncertainty about a slowdown in household spending and consumer prices prompted the Bank of England to freeze interest rates again this month, a report showed today.

A majority of the Bank’s nine-strong Monetary Policy Committee (MPC) decided there was insufficient evidence of a threat to their inflation forecast to raise the base rate above its current level of 4.75%, according to the minutes of the MPC’s April meeting.

The seven MPC members who voted to hold rates this month said an increase would be “difficult to explain and would surprise financial markets”.

Two members – Andrew Large and Paul Tucker – voted in favour of a quarter-point rise to 5%.

They said the underlying determinants of the housing market were firm, despite household spending apparently slowing faster than the MPC had expected, and “some rebound was likely”.

The risk of sharp falls in house prices and housing market activity had diminished, reducing one of the sources of downside risk to the forecast, they said.

Output growth remained robust, companies seem to be using much of their production capacity and oil prices were pushing up costs, they added.

“A quarter-point rise in interest rates now would help to contain medium-term inflationary pressures,” the report cited them as saying.