The Bank of England’s Monetary Policy Committee yesterday voted to keep the official Bank Rate on hold at 5.5 per cent.
The Bank had been under pressure to cut rates following the bad retail sales figures over Christmas, while other economists have been urging it to increase rates to curb growing inflationary pressures.
A disappointed British Chambers of Commerce claimed: ‘A modest interest rate cut would have alleviated the threats to the banking system and would have helped restore the smooth flow of credit in the economy.’
The EEF manufacturers’ organisation warned: ‘The evidence from the past month points to a growing risk of a weaker economy and there is little reason to believe the case for a cut will be any less strong next month.’
Shares in UK retailers slumped on Wednesday after Marks & Spencer revealed poor Christmas sales.
M&S share prices were 18.7 per cent lower by the close of trade on Wednesday. Sainsbury’s fell 5 per cent and Next share prices ended down 5 per cent.
Official figures yesterday revealed that the UK November deficit on trade in goods widened to £7.38bn, compared with October’s £7.35bn. Economists had forecast a deficit of £7.23bn.
The UK’s deficit on trade in goods and financial services was £4.4 billion in November, compared with a revised deficit of £4.3 billion in October (previously published as £4.1 billion).
The November surplus on trade in services was £3.0 billion, down from £3.1 billion in October.
Meanwhile, the Leader of the House of Commons, Harriet Harman yesterday confirmed that the government is to review the MPs’ pay system, and that they could lose the right to debate and vote on their own pay.
MPs will still have a free vote in a fortnight when they vote on a Senior Salaries Pay Board proposal for a 2.8 per cent rise, despite prime minister Brown making it clear he wants MPs to accept a 1.9 per cent rise, in line with the public sector pay freeze.
Harman told MPs this could be ‘possibly the last time’ they debate and vote on their own pay.
She said: ‘Many members say they find it unacceptable, and we know the public don’t accept that MPs should decide by voting their own pay and pensions.
‘We therefore intend to review the procedures for setting MPs’ pay and pensions in the future, with a view to examining options that find objective criteria for pay determination within a framework that does not require members to vote.’
l Tony Blair the renegade Labour Prime Minister has landed a $1 million a year job as a senior adviser at US investment bank JP Morgan.
Blair is said to be providing ‘political and strategic advice’ to the bank which is heavily involved in the subprime mortgage crisis.
