Banks unsurprised at maintenance of base rate

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Banks unsurprised at maintenance of base rate

Fri 8th Aug 2008

The Bank of England’s decision to hold the base rate at five per cent was expected, several banks have said.

The bank’s monetary policy committee (MPC) made the decision this week and will release its Inflation Report on August 13.

Abbey said that market commentators had expected the rate to be held this month.

It believed that most MPC members believed that recent evidence of slowing economic activity “provided a balance against the inflation indicators that are high and expected to rise further”.

Lloyds TSB said the rate decision was reflective of the “dilemma” faced by the Bank of England all year; namely, that the slowing economy demands lower rates but rising inflation “necessitates maintaining a tough stance”.

It said the first rate cut “is most likely to come in early 2009”.

Legal & General said a rate cut “cannot come too soon” for borrowers and would be an “important step towards recovery for the housing market”.

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