The Bank of England left interest rates unchanged at 5.25% following a surprise rise last month. In January, the Bank increased rates from 5.0% to 5.25% in an attempt to curb inflation, which had hit an 11-year high of 3% the month before.
The Bank's decision had been widely expected by analysts, after the Bank acted last month to curb inflation. The news is expected to offer relief to mortgage holders, as it will give some much-needed breathing space. The Bank of England has increased interest rates on three occasions by one quarter of a percentage point each time in August, November and January. Manufacturers welcomed the news, with the EEF saying the Bank had been right to take a wait-and-see stance. "The Bank is right to hold its fire until the smoke clears and the impact of the recent rises becomes clearer," said EEF chief economist Steve Radley adding that "another rise so soon after the last risks spreading unnecessary alarm amongst business and the consumer." The British economy remains strong, with forecasts predicting 3% growth in the first few months of 2007, while inflation has been significantly above Bank targets for a number of months, partly as a result of high fuel costs. Meanwhile, the housing market is resilient with the latest Halifax data showing property prices rising 1.3% in January. However many analysts believe rates could reach 5.5% by next June. Much will depend on the quarterly inflation report from the Bank of England which is scheduled to be released next week.