Sterling at two-month low as rates are kept on hold

STERLING HIT a two-month low yesterday after the Bank of England decided to keep interest rates on hold at 7.5 per cent.

Bonds rose as dealers speculated that the next move in UK interest rates would be down.

Jonathan Loynes, at HSBC Securities, said: "If the MPC had wanted to raise rates today - and some members almost certainly did - it had a number of perfectly reasonable excuses. The fact that a majority of members chose not to therefore suggests that there is a very good chance that rates have now peaked."

However, not all analysts agreed that June's rate rise was the last, warning that the Monetary Policy Committee had wrong-footed the experts before.

Economists speculated that the MPC was swayed by a raft of gloomy business surveys released over the past month, as well as growing signs of a slowdown in UK services. Yesterday saw the release of yet another downbeat business survey, which revealed that retail sales growth in July was the slowest for three years.

The Confederation of British Industry distributive trades survey found that 37 per cent of retailers reported increased sales last month compared with the corresponding period last year, while 31 per cent said sales were down. This means a positive net balance of just 6 per cent of retailers reported a sales increase in July, compared to 19 per cent in June and 25 per cent in May.

Alastair Eperon, chairman of the CBI's distributive trades survey panel, said: "The further slowdown in retail sales growth suggests that consumers have been discouraged by a combination of high interest rates and bad weather."

The weakness of the survey surprised the City, which had been expecting a more gradual slowdown in the growth of retail sales. Simon Briscoe, of Nikko Europe, said: "The boom of the last two years is now consigned to the history books."

The consensus view in the City was that base rates have peaked, and sterling fell by more than a pfennig to close at DM2.887. The September long gilt future rose 0.32 to 109.7.

The MPC gave no indication of why it decided to hold rates or whether rates were now high enough, although the Bank of England will provide a detailed assessment of the outlook for inflation next week when it releases its quarterly inflation report. As rates were not raised yesterday, analysts are now expecting a benign inflation report, and predicted that the Bank's forecasts for economic growth would be gloomy.

However, several economists refused to rule out another rate rise, saying that the MPC had surprised on the upside before. Sharda Persaud, of Paribas, said: "We had a benign inflation report in May, and the MPC hiked [rates] in June." Michael Saunders, of Salomon Smith Barney, said: "If the pound now falls sharply then the MPC may have to reconsider its view."

Separately yesterday, the Department of the Environment said housing starts were down 11 per cent in the second quarter and construction new orders were down 4 per cent, adding to the evidence of economic slowdown. The Society of Motor Manufacturers and Traders said new car registrations rose slightly in July, up 5.1 per cent to 37,896.

Outlook, page 17

News
people
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film Ridley Scott reveals truth behind casting decisions of Exodus
News
people
Sport
footballArsenal 2 Borussia Dortmund 0: And they can still top the group
PROMOTED VIDEO
Arts and Entertainment
An unseen image of Kurt Cobain at home featured in the film 'Kurt Cobain: Montage of Heck'
filmThe singers widow and former bandmates have approved project
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
Arts and Entertainment
George Mpanga has been shortlisted for the Critics’ Choice prize
music
News
Albert Camus (left) and Jean-Paul Sartre fell out in 1952 and did not speak again before Camus’s death
people
Arts and Entertainment
Roisin, James and Sanjay in the boardroom
tvReview: This week's failing project manager had to go
News
ebooksNow available in paperback
News
Ed Miliband visiting the Holocaust museum in Jerusalem. The Labour leader has spoken more openly of his heritage recently
newsAttacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But are the barbs more sinister?
Arts and Entertainment
'Felfie' (2014) by Alison Jackson
photographyNew exhibition shows how female creatives are changing the way women are portrayed in advertising
News
i100
Life and Style
Fright night: the board game dates back to at least 1890
life
Environment
The vaquita is being killed by fishermen trying to catch the totoaba fish, which is prized in China
environmentJust 97 of the 'world's cutest' sea mammals remain
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

£16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

£35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

Citifocus Ltd: Operational Risk Analyst

£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

Day In a Page

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
Arsenal vs Borussia Dortmund: Alex Oxlade-Chamberlain celebrates century with trademark display of speed and intuition

Arsenal vs Borussia Dortmund

The Ox celebrates century with trademark display of speed and intuition
Billy Joe Saunders vs Chris Eubank Jnr: When two worlds collide

When two worlds collide

Traveller Billy Joe Saunders did not have a pampered public-school upbringing - unlike Saturday’s opponent Chris Eubank Jnr
Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?