The Money Stop

Following the Monetary Policy Committee meeting that was held last week the Bank of England has announced that the base rate is to be kept on hold at 5% for yet another month. This signifies the fifth month in a row where the base rate has remained unchanged, as the central bank and members of the powerful MPC struggle to deal with both soaring inflation levels and a slowing economy.

Although the MPC has decided to keep the base steady again by leaving it at 5% industry officials are now stating that there is almost certainly going to be a rate cut by the end of the year, namely due to the speed at which the nation’s economy is heading towards recession. Some believe that if rates are not cut this year then they will have to be cut very early next year in order to try and combat the risk of recession in the UK.

The economy was at its worst since the dark days of the early 1990s in the second quarter of this year according to reports, but at the same time inflation levels were at 4.4%, which is more than double the government’s 2% target. Moreover there are concerns amongst many industry officials that inflation levels could soar to 5% or above by the end of the year.

Some industry groups were disappointed about the decision to keep rates on hold, and following the MPC meeting and announcement one official from the TUC said: “This is a depressing decision. A cut today would have offered hope to all those who fear for their jobs and homes, and helped cut through the economic pessimism that is now doing as much damage as the credit crunch and energy prices.”

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