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The Bank of England's Monetary Policy Committee voted to keep interest rates on hold at 5% today.
The decision to leave rates unchanged is likely to have been a close call as the MPC continues to battle with rising inflation and a slowing economy.
Last month rates were cut by a quarter-point and some economists had called for another quarter-point reduction this month. In recent weeks we have seen new data suggesting that further intervention from the Bank of England is essential if we are to ward off a sharp economic slowdown.
Retailers and manufacturers had a tougher-than-expected April, as did the housing market. Figures from both Halifax and Nationwide revealed that house prices have fallen on an annual basis for the first time in 12 years. Prices fell by 1.3% last month according to Halifax, and they're 0.9% lower than they were this time last year. The bank has also revised its forecast for annual growth - it had been expecting house price growth to be flat this year, but it now thinks values will fall by between 4 and 6%.
One member of the MPC, David Blanchflower, had been calling for a half-point reduction in Bank rate this month. He warned last week that this was needed in order to avoid a slump like that the US is currently experiencing. However Blanchflower's views were clearly outnumbered by fellow members, who are more concerned about rising inflation than the slowing economy.
Oil has surged to new highs again this week with crude breaching the $122 a barrel mark last Tuesday. The Bank of England's Quarterly Inflation Report is [also] due out next week, and it is expected to show that inflation is currently running above the 2% target. Committee members may also have decided to leave rates unchanged this month to see if the Bank's recent initiative aimed at pumping £50billion into the financial markets will help ease the mortgage squeeze.
However, if the economic slowdown continues unabated, we will almost certainly see further cuts in the coming months.
