Lloyds TSB backs base rate decision

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Lloyds TSB backs base rate decision

Thu 9th Jun 2005

Lloyds TSB has backed today's decision by the Bank of England Monetary Policy Committee (MPC) to keep interest rates on hold at 4.75 per cent.

The bank said it would be "too soon" for the Bank of England to cut the base rate, since strong growth was occurring in the service and construction sectors.

The financial markets had called for a rate cut amidst the problem of lower consumer spending and a fall in manufacturing output.

"The MPC are adopting a wait and see attitude at the moment, keeping an eye on global economic conditions and the fact that price inflation is close to, and possibly set to go above, the two per cent target," explained Trevor Williams, chief economist at Lloyds TSB Financial Markets.

He argued that the strong employment situation, combined with a four per cent plus annual growth in wages, meant that spending could recover later in the year due to the rise in consumer incomes.

However he admitted that if this did not take place and growth fell below the long run trend, the MPC would then have the option of cutting interest rates.

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