Borrowing: Rates pause for breath

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The Independent Online

The Bank of England has left interest rates on hold at 5.25 per cent. The decision, widely expected, is seen simply as a pause for breath, prior to a fresh round of rate cuts this summer.

The Bank had cut rates by 0.25 per cent in both December and February to reduce the risk of recession, after continued turmoil on international money markets.

However, it has to be careful about cutting too far and too fast as there are strong signs that inflation is re-emerging. In particular, fuel and food prices have been rising strongly, as has the cost of some manufactured goods coming from China.

May is widely seen as the next month in which there is a strong chance of a rate cut, probably to 5 per cent. But some experts suggest that a reduction sooner is possible. "A move in April can't be ruled out, but it would probably only occur if economic data deteriorate markedly in the coming weeks," said Howard Archer, an economist at analysts Global Insight.

A cut can't come soon enough for some. The British Chambers of Commerce, for instance, said that boosting a sluggish UK economy should be a priority for the Bank.

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