10 Jan, 2008
Published: 14:10 Thursday 10 January 2008
By: Matthew Goodburn, Investment Correspondent
The housing sector has reacted with dismay to the Bank of
England's Monetary Policy Committee (MPC) decision to hold interest
rates at 5.5%.
Many analysts had been factoring in a 0.25% fall but fears over
rising inflation numbers appears to have held sway over the
weakening economic backdrop.
Chief executive of finance specialist to UK house builders Wolsey
Mike Ratcliffe attacked the MPC for ignoring the weakening consumer
He said: 'The decision is a clear sign that the MPC is not
sufficiently in touch with the realities affecting UK consumers.
While last month's cut was a step in the right direction, failing
to follow this up with a further cut will inflict pain on consumers
and businesses and does not provide us with a positive outlook for
He added: 'The danger is that this apathy will increase the chances
of the country talking itself into a recession.
David Newnes, managing director of Your Move estate agents accused
the MPC of 'fiddling while Rome burns'.
He said: The MPC should have cut rates. The economy is still
reeling from the credit crunch. The property market is suffering
severely - transactions have fallen and house prices are
stagnating. We need resolute action - not dithering.
'The Bank of England should be acting decisively to reinstate
confidence across the wider economy. The property market, consumer
confidence, and the wider economy are suffering while the MPC
The decision was made despite growing evidence of an economic
downturn, highlighted yesterday by Marks & Spencer's worse than
expected Christmas trading and the British Retail Consortium's
(BRC) figures highlighting the worst Christmas trading on the High
Street for three years.
BRC chairman Kevin Hawkins and Marks & Spencer chief executive
Sir Stuart Rose had both called for a 0.5% cut in rates to
stimulate consumer spending but fears over rising inflation appears
to have won the day.
Despite the rate hold, ABN Amro's head of interest rate alpha Jon
Cunliffe said he expected rates to have fallen to 4.5% by year end.
He added: 'While rising utility prices may put some upwards
pressure on consumer price inflation, we feel that the
disinflationary forces evident in the retail sector are likely to