MercoPress. South Atlantic News Agency

Bank of England leaves interest rate unchanged, 4.5%

For the tenth month running the Bank of England Monetary Policy Committee decided to leave interest rates unchanged at 4.5%, a decision expected by financial markets.

However concerns about rising inflation has led analysts to expect the next move in rates will eventually be up since the bank's most recent quarterly report warns that inflation could overshoot its 2% target if base rates remained at 4.5%.

But some economists believe that the recent weakness in the stock market, the fall of the US dollar and the cooling of the housing market will make the Bank of England hesitate before raising rates.

"The sharp declines in equity prices, which recently brought the longest bull-run for five decades to an abrupt end, and sterling's marked appreciation will have weighed against a rise in base rates," said Andrew McLaughlin, chief economist at the RBS Group.

The Confederation of British Industry said it was relieved that rates were left unchanged, particularly following the unexpected 0.2% April drop in manufacturing.

"The economy is recovering from the doldrums of last autumn, raising some fears of the prospect of a modest acceleration in inflation," said Ian McCafferty, CBI chief economic adviser who added that "leaving rates unchanged sends out a confidence-enhancing message of stability".

The British Retail Consortium announced this week that retail sales rose in May, helped by demand for new televisions ahead of the World Cup, although it warned that fragile consumer confidence would be damaged by any rise in rates.