Lloyds TSB: Bank of England "walking a tightrope"

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Lloyds TSB: Bank of England "walking a tightrope"

Lloyds TSB believes the Bank of England's decision to keep the official bank rate at 5.25 per cent is the "best way" to keep a balance between the twin risks of inflation and an economic slowdown.

Trevor Williams, chief economist at Lloyd's TSB corporate markets, said the Bank is "walking a tightrope at the moment", but with inflation rising beyond its target of two per cent, "quite a sharp slowdown in economic growth would be needed before the monetary policy committee (MPC) would act to cut rates".

He acknowledged that there are signs the housing market is halting its decade-long growth and consumer confidence is falling, but said that otherwise the UK economy "is still in relatively good health".

Mr Williams pointed to retail sales growth of 5.6 per cent in 2007 and a pick-up in manufacturing and services activity last month, which he said showed the UK is still "far from recession".

Current conditions would not be enough to make policy-makers cut rates again, he added.

Last month, on February 7th, the MPC reeducated the bank rate by 0.25 per cent.
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