No surprise as rates left unchanged

The influential Ernst & Young ITEM club was not been surprised by the
MPC’s decision to hold interest rates at 5.25%.

Professor Peter Spencer, chief economic advisor to the ITEM Club, said: ‘This
decision doesn’t come as a surprise. I think the MPC will wait to see how things

‘Furthermore, the strong growth in UK labour supply – based on immigration
and the return of older workers to the workforce – and the fall in world oil and
commodity prices should be sufficient to bring CPI inflation back down to the 2%
target by the end of the year without another rise in interest rates.

‘However, the MPC will not hesitate to raise interest rates to 5.5% if there
are more definite signs of headline inflation pushing up wage settlements.’

Further reading:

Corporate financiers fear interest hikes will damage deal

E&Y ITEM Club: No more rate rises this year

Shock interest rate rise by Bank

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