British interest rates unchanged
LONDON, England (CNN) -- The Bank of England has left its key interest rate unchanged, despite ongoing concerns over booming house prices and growing consumer debt.
But analysts -- many of whom were divided over what decision the BoE would make Thursday -- expect the central bank to raise borrowing costs next month.
The BoE's key rate has stood at 4.0 percent since February, when central bankers raised it by a quarter point.
It also hiked the rate by a quarter point in November from 3.5 percent.
The bank began pushing up rates after the UK economy shook off the impact of a global downturn.
However, the BoE is continuing to monitor the effects of strong economic growth -- and the added stimulus of a hot property market -- for signs of inflation pressure, which could prompt another rate rise in an effort to cool borrowing.
A weak manufacturing sector has contributed to the BoE's hesitancy to raise rates. Higher borrowing costs would increase corporate debt load, as well as limit new spending and job creation.
There is also concern that the recent strengthening of the pound -- which increases buying power overseas but hampers the economy by making UK exports more expensive -- could be accelerated by higher interest rates, which makes sterling-denominated investments more attractive.
"Two rises in three months would have poured fuel on the fire of expectations of further rises to come, potentially pushing the pound to damaging levels against the dollar,'' Steve Radley, chief economist at the Engineering Employers' Federation, told Reuters.
"The bank can afford to wait longer to assess the impact of the last two rate rises on both the consumer and the dollar weakness on the economy overall.''
 ECB rates have been on hold the past nine months. |  |
Thursday's decision by the BoE comes one week after the European Central Bank, which is responsible for monetary policy within the 12-nation euro zone, left its key interest rate on hold. (Full story)
The ECB is now expected to move in the opposite direction of the BoE and begin cutting lending costs.
Unlike Britain, the euro zone is faced with weak consumer spending and a lagging economy.
The ECB's key rate has been at 2.0 percent for the past nine months.
Meanwhile, in the United States -- where the economy remains fairly robust -- the Federal Reserve's key lending rate currently stands at 1.0 percent, while the Bank of Japan has pushed borrowing costs to zero percent in an attempt to spark a long-awaited recovery.
