Industry comments on Bank's interest rate decision

08 October 2004
Yesterday's decision by the Bank of England (BoE) to leave interest rates on hold has been welcomed by commentators.

Peter Bolton King, chief executive of the National Association of Estate Agents claimed the five increases in the last year have had the required effect and slowed a previously "racy" housing market.

However, he expects a further quarter of a point rise before the end of the year which he believes are "not needed by the housing market, let alone the dismal manufacturing sector", and will do it "no favours".

Meanwhile, Jeremy Peat, chief economist at The Royal Bank of Scotland Group, also welcomed the decision.

"This must have been another wholly non-controversial MPC meeting," he said.

"Indeed, I would be surprised if anyone even bothered seriously to argue the case for a rate rise.

"The distinct majority of recent data, domestically and internationally, have been softer than expected.

"In the UK industrial production has disappointed, while retail sales look to have sagged and the housing market appears headed for a soft landing.

"Inflation remains muted, with - despite rising oil prices - no hint as yet of any feed through to wider wage and price-setting behaviour."

Graeme Leach, chief economist at the Institute of Directors (IoD), commented: "Today's decision was as expected. The Bank of England is sensible to adopt a wait and see approach as the effects of the interest rate rises over the past year take effect.

"There is clear evidence of a housing market slowdown and manufacturing output has fallen for three months in a row.

"But this does not mean that interest rates have peaked. The UK output gap is now positive. In other words, actual output is above potential output, thereby risking an acceleration in inflation.

"We think there is a 50-50 chance of another interest rate rise before the year-end."
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