UK Interest rates sticks at 3.75%

As expected, the Bank of England has decided to hold the base rate at 3.75% today.

The Bank's Monetary Policy Committee (MPC) opted to hold the rate following a quarter point rise in December - the first rise in four years.

However, analysts are continuing to warn consumers that rises are imminent in the year ahead.

The manufacturing sector continues to be concerned that a rise in interest rates will help push up an already exporter unfriendly dollar-sterling exchange rate. But this is offset by a concern that a low borrowing rate is fuelling runaway house price increases and building up undesirable inflationary pressures within the UK economy.

Following today’s decision by the MPC to leave interest rates on hold, Richard Dakin for Lloyds TSB, said: "Today’s decision was widely anticipated and does not come as a surprise. With inflation low and uncertainty persisting over retail spending growth, the MPC knows it has ample scope to wait before making a decision to raise interest rates.

"High Street spending picked up at the end of December but this was due partly to discounts being offered by retailers. Raising rates now could jeopardise growth in the sector, which is already slowing.

"The MPC will also be keen to take stock of February’s inflationary report, which will take account of the new inflation measure and target, before moving to raise interest rates."

Earlier one union urged the MPC to cut interest rates to help secure manufacturing jobs which are considered to be at risk.

Amicus said it had written to the MPC in a plea for British exports to prioritised over consumer spending against the backdrop of low interest rates in Europe and the US.

Roger Lyons, Amicus General Secretary and President of the TUC, said: "There is massive uncertainty because of last months rise in interests rates. Obsession with consumer spending and house prices in the southeast is hammering British manufacturing export markets.

"The only way to slow the growth of sterling is to cut interest rates which are already higher than those in the EU and four times as high as the US."

(SP)