Homeowners hoping for a back-to-back cut in borrowing costs were left frustrated yesterday after the Bank of England kept interest rates at 5 per cent.
Members of the Bank's Monetary Policy Committee (MPC) had been under pressure to make a fourth cut in six months following a flurry of poor economic news.
City economists said they expected the next cut to be made next month, with policymakers rel
uctant to do so yesterday because of fears that oil and food prices will force inflation above 3 per cent.
Data earlier this week revealed that activity in the services sector slowed to its lowest level since March 2003 as firms such as banks, hotels and restaurants felt the force of rising costs and a downturn in new orders.
There was also a shock fall in manufacturing output in March, with a 0.5 per cent decline surprising analysts who had forecast manufacturing production to remain unchanged. Further pressure was piled on the MPC by the property market downturn.
Philip Shaw, chief economist at Investec Bank, said the decision reflected concerns about inflation.
He said: "While there has been a degree of poor economic news, the committee remains concerned over inflation and believes the relative weakness of sterling will provide the economy with a degree of stimulus."
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