Banks interest rate freeze finds favour

Commentators have come out in support of the Bank of England's decision to keep interest rates on hold this month.

08:41 10 September 2004

Commentators have come out in support of the Bank of England's decision to keep interest rates on hold this month.

The chief economist at KPMG, Andrew Smith, was unsurprised by the lack of rate change. However, he was quick to point out that the MPC may have slowed the housing market and weakened retail sales but there was still much to do.

"Monetary policy is now entering a particularly delicate phase as the MPC continues to walk the tightrope between engineering a 'soft landing' for the housing market and consumer spending on the one hand and the risk of precipitating a housing crash and a more abrupt economic slowdown on the other."

He added: "With the softly, softly approach apparently working so far, we expect the MPC to continue with its cautious approach."

Liberal Democrat shadow chancellor, Dr Vince Cable MP, said: "The recent interest rate rises appear to have curbed the consumer boom but have also led to a decrease in manufacturing output."

Dr Cable attacked the chancellor, saying: "Gordon Brown urgently needs to take responsibility for the imbalance within the economy."

The Institute of Directors (IoD) claimed the MPC's decision was good news. It believes that further interest hikes would only serve to de-stabilise the already fragile business market.

The chief economist at the Institute of Directors, Graeme Leach said: "Now is not the time to increase the burden on businesses by a hike in interest rates. We are pleased to see that the Bank of England has decided to hold off another rate rise this month."

While many commentators feel another rise is likely this year, the IoD believes the rate will not increase to five per cent until early 2005.