UK interest rates held as labour market strengthens

The Bank of England left interest rates on hold yesterday as new figures pointed to a rebound for the UK economy for the fourth day this week.

Shop prices rose at the fastest rate for six years last month, demand for staff surged while car sales hit a four-year high.

The decision was widely expected as the financial markets continued to bet the next move in rates would be up in the face of rising growth.

Business groups, which had not lobbied for a cut, accepted the decision but urged the bank to ignore market pressure for a rise. "This decision is acceptable to business at the present moment," David Frost, the director-general of the British Chambers of Commerce said. "We urge the Bank to keep the interests of business at the heart of its deliberations ... There is scope to keep rates at their record low level for some time to come."

Analysts in the City agreed the decision came as little surprise given a run of figures showing house prices rising, consumer borrowing at record levels, construction booming and signs of recovery in manufacturing. Figures yesterday showed demand for new workers rose "sharply" last month, according to a survey by the Recruitment and Employment Confederation.

The rate of expansion of demand for staff, signalled by its vacancies index, was the fastest since February 2001. Gareth Osborne, REC's managing director said: "The pick-up in the labour market seems to be strengthening, which is good news for ... the economy."

There had been speculation the first rate rise might have come as soon as yesterday but analysts were keen to play down the threat of an imminent move. "We expect the first upward move to accompany February's Inflation Report," Geoffrey Dicks, the chief economist at Royal Bank of Scotland, said.

On Wednesday Robert Parry, the head of the San Francisco Fed, warned of "downside risks to be aware of" - a sign the US central bank is in no hurry to raise rates. The European Central Bank also played down fears of an imminent hike as it too decided to keep policy unchanged.

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