City hopes rates have peaked

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The Independent Online
THE BANK of England left the cost of loans unchanged this month, to the relief of home-buyers and businesses.

The decision, in the wake of signs that the economy is slowing, makes it unlikely that there will be any further interest rate rises, analysts said. Interest rates have risen five times in the past year. The last increase, in November, took them to 7.25 per cent compared with 6 per cent at the start of May 1997.

The pound reacted yesterday with a further 3 pfennig fall to just over DM2.90, its lowest level since December. One respected economic forecasting group predicted sterling would fall to DM2.75 by the end of this year.

There were also fresh signs that growth is slowing to a more sustainable pace, with a survey of high street trading by the Confederation of British Industry (CBI) showing that, while sales bounced last month after a dismal March, the underlying trend had declined.

"Interest rates have reached their peak. The very weak performance from industry has settled it," said Kevin Gardiner, UK economist at Morgan Stanley.

Kate Barker, the CBI's chief economist, welcomed the decision by the Bank's Monetary Policy Committee, and said the next move should be a cut in borrowing costs.