Interest rates kept on hold

The Bank of England today kept interest rates on hold at 4% for the fourth month in a row.

The widely–expected decision came despite a call by union leaders the TUC for a cut of 0.25%.

But although business leaders see scope for another cut in the near future, economists think the interest rate cutting cycle has come to an end and are forecasting rates to start rising later in the year.

Last year, the Bank of England slashed the cost of borrowing by two percentage points, to fend off an expected collapse in consumer confidence in the wake of the September 11 terrorist attacks in the US.

The Bank cut rates seven times in total in 2001, and the last move was in November when it took the dramatic step of shaving the cost of borrowing by 0.5% to boost the economy, bringing rates down to their lowest for nearly 40 years.

The cuts during 2001 in all knocked more than £100 a month off the average homeowners' mortgage.

Figures today from the Halifax showed the rate cuts were helping buoy the housing market, as prices shot up 1.5% in February. The average house price now stands at £101,980.

In the City there was no surprise at today's decision.

Philip Shaw, economist at Investec bank, said: "The move comes as no surprise. However the MPC will be watching consumer spending growth very carefully and keeping a close eye on developments in the global economy."