The Bank of England's Monetary Policy Committee (MPC) voted to maintain the official Bank Rate paid on commercial bank reserves at 5%.
This is the fifth consecutive month the rate remains unchanged, the previous change occurring on 10 April when the Bank Rate was reduced 0.25 percentage points.
Edward Menashy, chief economist at Charles Stanley said: “The no change decision was made despite the latest OECD forecast that indicated that UK GDP growth would be 1.2% lower than the 1.8% growth estimate that the organisation had made three months ago. Reductions of similar order were made for most Eurozone economies.
“However, help is at hand, inflation is approaching a peak, with data from Germany, Spain and China indicating that the rate of inflation has started to decline because of the fall in prices of oil and other commodities.
"The UK Consumer Price Index is expected to reach 5% in September or October 2008. In consequence, this achievement could lead to an interest rate cut as early as November 2008.”
Alun Powell, senior economist at HSBC expects the MPC to cut rates over the next month or so, as the price of oil, a key driver of inflation is starting to come down.
Ian Kernohan, Royal London Asset Management’s economist also predicts rate cuts before the end of the year as, “economic news is set to deteriorate further.”
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