Business loan applicants told Bank is playing waiting game

Fri, 08 Jun 2007

The Bank of England's monetary policy committee (MPC) is biding its time before deciding whether the UK economy would benefit from another base rate rise, business loan customers have been told.

That is the view of Trevor Williams, chief economist at financial services provider Lloyds TSB Corporate Markets, after it was announced this week that interest rates would be held at 5.5 per cent.

It is a decision that comes on the back of four quarter-point interest rate hikes in the last 12 months, beginning in August 2006.

And Mr Williams has argued that the Bank has effectively chosen to assess the impact of these rises for another month before deciding what action to take.

"By holding rates, the MPC [monetary policy committee] has bought time to gauge the impact of recent increases before deciding whether or not it needs to make another move," he said.

In April 2007, the Bank opted to raise interest rates to 5.5 per cent after it was revealed that consumer prices index inflation had increased to 3.1 per cent, meaning it had fallen outside chancellor Gordon Brown's stated upper limit of three per cent.

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