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UK interest rates remain at 5.5% UK interest rates remain at 5.5%
(10 minutes later)
The Bank of England has held UK interest rates at 5.5% following its latest meeting, but analysts say a rate rise later this year remains likely.The Bank of England has held UK interest rates at 5.5% following its latest meeting, but analysts say a rate rise later this year remains likely.
The decision to freeze rates had been expected, to give the Bank time to assess the impact of recent rate rises.The decision to freeze rates had been expected, to give the Bank time to assess the impact of recent rate rises.
UK rates have now been increased four times since August last year in an attempt to rein in inflation.UK rates have now been increased four times since August last year in an attempt to rein in inflation.
But with price growth still strong, many analysts expect a further rise to 5.75% before the end of the year.But with price growth still strong, many analysts expect a further rise to 5.75% before the end of the year.
Rate impactRate impact
Business groups welcomed the decision by the Bank's Monetary Policy Committee (MPC) to freeze rates.Business groups welcomed the decision by the Bank's Monetary Policy Committee (MPC) to freeze rates.
"Whilst the door remains open for a further rise if necessary, today was not the day for tougher action," said EEF chief economist Steve Radley."Whilst the door remains open for a further rise if necessary, today was not the day for tougher action," said EEF chief economist Steve Radley.
The Bank of England's decision to leave interest rates unchanged may well prove to be only a temporary reprieve Howard Archer, Global InsightThe Bank of England's decision to leave interest rates unchanged may well prove to be only a temporary reprieve Howard Archer, Global Insight
CBI chief economic adviser Ian McCafferty applauded the Bank for resisting "rushing into a rate rise that, though widely expected, may still prove unnecessary".CBI chief economic adviser Ian McCafferty applauded the Bank for resisting "rushing into a rate rise that, though widely expected, may still prove unnecessary".
"Evidence is starting to emerge that the four rate rises since August are having an impact," he added."Evidence is starting to emerge that the four rate rises since August are having an impact," he added.
Earlier this week, the latest survey from the British Retail Consortium recorded a drop in underlying sales during May, with recent rate rises being cited as one factor putting off shoppers.Earlier this week, the latest survey from the British Retail Consortium recorded a drop in underlying sales during May, with recent rate rises being cited as one factor putting off shoppers.
Price pressuresPrice pressures
However, although the Bank refrained from raising rates this month, many analysts think there is a very strong chance of rates hitting 5.75% in the near future to keep inflation under control.However, although the Bank refrained from raising rates this month, many analysts think there is a very strong chance of rates hitting 5.75% in the near future to keep inflation under control.
Concern is brewing for people who took out fixed rate mortgages two years ago Evan Davis, BBC Economics Editor Read Evan's comments on fixed rate mortgages
While consumer price index (CPI) inflation fell from 3.1% to 2.8% in April, the measure still remains well above the government's target of 2%.While consumer price index (CPI) inflation fell from 3.1% to 2.8% in April, the measure still remains well above the government's target of 2%.
Recent economic releases have suggested business confidence is rising and have also indicated that companies are looking to raise prices.Recent economic releases have suggested business confidence is rising and have also indicated that companies are looking to raise prices.
In the housing market, while price growth has slowed, the annual rate is still hovering around the 10% mark.In the housing market, while price growth has slowed, the annual rate is still hovering around the 10% mark.
A poll of analysts by the Reuters news agency earlier this week put the chances of rates hitting 5.75% this year at 80%, with a 30% chance they rise to 6%.A poll of analysts by the Reuters news agency earlier this week put the chances of rates hitting 5.75% this year at 80%, with a 30% chance they rise to 6%.
"The Bank of England's decision to leave interest rates unchanged may well prove to be only a temporary reprieve," said Howard Archer, chief UK and European economist at Global Insight."The Bank of England's decision to leave interest rates unchanged may well prove to be only a temporary reprieve," said Howard Archer, chief UK and European economist at Global Insight.
"We suspect that another 25 basis point hike to 5.75% could arrive as soon as July.""We suspect that another 25 basis point hike to 5.75% could arrive as soon as July."
James Knightley at ING said: "Interest rates are going higher and we suspect that they will get to 5.75% in July, based on the recent data flow and the hawkish tone to Bank of England comments."James Knightley at ING said: "Interest rates are going higher and we suspect that they will get to 5.75% in July, based on the recent data flow and the hawkish tone to Bank of England comments."
The UK is not the only nation wrestling with the problems of inflation.The UK is not the only nation wrestling with the problems of inflation.
On Wednesday, the European Central Bank raised its main interest rate to 4% and also increased its inflation forecast for the eurozone this year to 2% from 1.8%.On Wednesday, the European Central Bank raised its main interest rate to 4% and also increased its inflation forecast for the eurozone this year to 2% from 1.8%.