The Institute of Directors (IoD) said the Monetary Policy Committee's decision to leave interes...
The Institute of Directors (IoD) said the Monetary Policy Committee's decision to leave interest rates at 4% yesterday was unsurprising, given the current uncertainties about the direction of the economy.
The IoD insists the economy is still 'two speed'. It noted the depressed manufacturing sector, weaknesses in other parts of the economy such as advertising and travel but the relative firmness in the retail sector and, especially, the housing market. Car sales have been very firm, consumer debt has soared to new records and the housing market is still lively. The public sector is also expanding.
Ruth Lea, Head of the Policy Unit, said: "Even though there are still worries about the domestic economy and the global situation still looks fairly grim – though there are already signs of improvement in the all important US economy – we do not, on the whole, expect further cuts in interest rates unless there is a rapid deterioration in economic activity."
"The bias now, therefore, seems to be towards monetary tightening. But we believe that, provided sterling remains strong and consumer behaviour is reasonably in control, such tightening should only be modest this year. This scenario would change, of course, if sterling fell significantly and/or consumer spending were to be very buoyant," added Lea.
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