UK interest rate left unchanged

The Bank of England has left interest rates on hold for the ninth month running, at 4.75%.

The decision by the Monetary Policy Committee (MPC) came shortly after the publication of figures which showed a drop in the output of manufacturing industries.

The Office of National Statistics (ONS) reported that the manufacturing output dropped by 1.6% between February and March.

The decision, which was delayed because of last week’s general election, also follows a jump in inflation, from 1.6% to 1.9% in March, just under the Bank’s 2% target.

The MPC’s decision has been welcomed by the Confederation of British Industry (CBI). Last week, the CBI’s monthly Distributive Trades Survey reported a drop in sales, which it said was the most significant year-on-year fall since July 1992. The CBI said that trading was poor across most sectors, with chemists, furniture and carpet retailers being the most badly affected and warned against a “premature rise” in interest rates.

Reacting to the Bank of England's decision, CBI Chief Economic Adviser Ian McCafferty said: "Business and consumers need continued stability and will be pleased with today's decision to hold rates for the ninth consecutive month.

"Today's official figures confirm the first quarter fall in manufacturing output, and with CBI data showing that this continued into April, conditions are tough for business. Manufacturers are being hit by the continued increase in the costs of oil and raw materials and retailers have been affected by a dip in consumer confidence in the high street.

"With increased taxes coupled with higher fuel and utility bills and a slowdown in the housing market, consumers are becoming more cautious about spending money."

(KMcA/GB)