MercoPress. South Atlantic News Agency

Bank of England leaves interest rates at 4.5%

The Bank of England left Thursday its key interest rate unchanged for the eighth consecutive month as rising energy prices and a recovering housing market offset worries about slowing growth in the services and manufacturing sectors.

The decision to leave the rate unmodified at 4.5% comes amid continued strength in the energy sector, with the U.K top gas supplier, Centrica, lifting customer rates by 22% in March.

The housing market, a key pillar of support for the U.K. economy, also is showing signs of strength. The Halifax bank reported on Thursday that U.K. house prices rose 0.9% month-on-month in March.

Though the bank noted that housing market activity, particularly outside of London, may be starting to level off due to higher utility bills and council taxes, demand is underpinned by high employment, a strengthening economy and low interest rates.

The decision by the Bank's Monetary Policy Committee (MPC) had been widely predicted by economists and many analysts are now saying that UK interest rates are likely to remain where they are for the rest of 2006. The Bank will be reluctant to make any changes, experts say, with inflation close to its target and economic growth forecast to pick up.

However the British Chambers of Commerce (BCC) said the Bank should be prepared to take swift action when necessary. "We strongly urge the MPC to maintain a flexible stance," said BCC director general David Frost. "Most analysts, and the Bank of England's own comments, acknowledge the risks to economic growth."

The Confederation of British Industry said that it was "disappointed" that rates were not cut. "We think there's room for a small cut and look to the Bank to do so if there's no sign of a pick-up in momentum in the economy," said Ian McCafferty, the CBI's chief economic adviser.

In its latest quarterly forecast, the Bank of England predicted that economic growth would recover in the UK, while inflation would remain around the 2% target. Consumer price index (CPI) inflation was at 2% in February, having risen from 1.9% the month before.

A survey of 23 independent economists by the Treasury showed they expect the economy to rise 2.2% over the course of the year, while the Bank of England forecasts 2.7%.