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Interest rate held at five per cent

The Bank of England voted today to hold interest rates at five per cent.

The bank's monetary policy committee (MPC) ruled that economic conditions do not demand a further interest rate rise.

However, with inflation still 0.4 per cent above target, the MPC deemed it too early to reverse the 0.25 per cent rate hike introduced in November.

Borrowers have been hit by two interest rate rises this year, with the bank first increasing the underlying cost of borrowing in August.

Although today's hold was widely predicted, some economists are already predicting a further rate hike for the new year.

Mehrdad Yousefi, head of intermediary mortgages at Alliance & Leicester, said: "Most commentators still believe there is a likelihood of an interest rate rise sometime in early 2007."

However, Ray Boulger from John Charcol argued that the MPC "will be prepared to wait some months to see the impact of the two recent bank rate rises before seriously considering another increase."

Trevor Williams, chief economist at Lloyds TSB agreed that "it is probably too early to judge the real impact of the two rate increases since August, so the MPC has wisely decided to hold off", predicting that rates will remain at five per cent until February.

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07/12/2006 14:13:40

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