BoE holds rate at 5.25%

June 6, 2001
Web posted at: 1058 GMT

LONDON (CNN) -- The Bank of England left interest rates on hold at 5.25 percent on Wednesday, as was widely expected, a day before the general election.

All but one of 33 economists polled by Reuters expected the rate-setting Monetary Policy Committee to hold fire on rates, which are still the highest among the Group of Seven leading industrialised nations.

"The market thinks it is on safe ground and the MPC will keep rates steady due to the election and the robust level of consumer demand," economists at Bear Stearns wrote in a note to investors before the decision.

An interest rate move before the public go to the polls on Thursday would have been seen as a political endorsement.

Inflation in the world's fourth-biggest economy stood at 2 percent in April, while the government has set a target rate of 2.5 percent. The MPC has cut interest rates three times this year to bolster consumer confidence amid a slowdown in economic activity in the U.S. and Asia.

Jeremy Hawkins, economist at the Bank of America, told CNN that the BoE would hold rates "because of strong data" but is expected to cut them next month.

The Halifax (HFX), the UK's biggest mortgage lender, said on Tuesday house prices rose 1.5 percent in May to stand 7.3 percent higher on the year. The bank said house prices would continue to rise for the remainder of the year.

In another report, the Chartered Institute of Purchasing and Supply said May business activity rose to 52.0 from 51.2 in April, as the sector started to shake off the "foot-and-mouth" agricultural crisis.

And the Confederation of British Industry said consumers continued to spend despite signs of a global economic slowdown. The CBI said 56 percent of retailers reported a rise in sales volumes compared with a year ago.

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Euro-zone, UK to hold interest rates steady - Jun. 4, 2001
Bank of England

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