Export plea for rates freeze as pound hits 10-year high

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The Independent Online
THE POUND soared yesterday to its highest level against the German mark this decade. Sterling fever on the foreign exchanges led to fresh pleas from industry to the Bank of England not to raise interest rates when its Monetary Policy Committee (MPC) meets next week.

The pound jumped from just under DM3.08 to a whisker below DM3.10, the highest since August 1989. Its index against a range of currencies rose 0.5 to 108.7. The sterling index has gained 4 per cent since the start of this year and nearly 2 per cent since the Budget.

Analysts predicted the pound would stay strong for the foreseeable future. Gerard Lyons at DKB said: "The British economy is in better shape than the Continental economies, and the pound can stay stronger for longer. We're just going to have to put up with it."

Business organisations were pessimistic about the prospect of any respite from the exchange rate squeeze, which companies complain is pricing UK goods out of export markets.

Alan Armitage, economic adviser at the Engineering Employers' Federation, said: "The pain is there, but it is hard to see what policy measures could be taken."

Kate Barker of the Confederation of British Industry said: "If the pound stays at this kind of level for the rest of the year, you can expect to see exporters starting to pull out of markets and multinationals starting to shift their production elsewhere."

Figures hinting at a slowdown in consumer spending at home, which might help the doves on the MPC win their argument again this month, had no impact on the markets.

The increase in consumer credit in February was pounds 1.1bn, down from a record pounds 1.3bn in January. The Bank also reported a modest slowdown in the growth of M0, the narrow money measure consisting mainly of cash in circulation, fitting in with anecdotal reports of a slower pace of high street spending.

Separately, the Nationwide building society said house prices rose less rapidly in March, although they had now comfortably passed their 1989 peak. Prices rose by 0.8 per cent during the month to reach a level 12.3 per cent higher than a year earlier.

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