The Bank of England Monetary Policy Committee (MPC) yesterday kept interest rates on hold at 5% as the central bank struggles to deal with the declining economy and spiralling inflation.
The Bank said: ‘The Committee’s latest inflation and output projections will appear in the Inflation Report to be published on Wednesday 13 August.’
The TUC said it was disappointed with the rates decision.
TUC Head of Economics and Social Affairs Adam Lent warned: ‘While the government talks of the need for an economic recovery plan to restart growth in the UK, the Bank is doing all it can to hold down consumer confidence and business investment.
‘This is not the time to be holding rates when the prospects for the economy in 2009 look increasingly weak.
‘The Bank should cut, and cut fast.’
Lent had said on Wednesday: ‘The Bank must prioritise economic growth now rather than waiting until the economy has stalled.
‘The current concern of the Bank is to prevent “inflationary expectations” getting out of control by holding or even raising rates.
‘But it is crystal clear from recent surveys that it is actually the expectation of a recession that is spiralling and which threatens to push the UK into even deeper problems.
‘A rate hold will only reinforce this perception of impending recession and a rise will send it off the scale.’
Bosses’ organisation, CBI Director-General Richard Lambert said: ‘The latest data show the slowdown in UK economic activity gathering pace, and business and consumer confidence falling further.
‘However, with inflation heading higher in the next couple of months, the Bank is right to leave rates on hold for the time being.’
The Engineering Employers Federation (EEF) said that the decision to hold rates was understandable.
EEF head of economic policy, Lee Hopley commented: ‘The MPC continues to be pulled in opposing directions by rising inflation and slowing growth.
‘However, the balance of risk appears to be shifting more rapidly.
‘A cut in interest rates may be needed sooner rather than later to prevent the economy from drifting towards recession.’
British Chambers of Commerce economic adviser, David Kern added: ‘The MPC cannot ignore the fact that recession threats have worsened.
‘While the near-term rise in inflation is unavoidable, it is also temporary as weaker growth would clearly push down inflation sharply next year.
‘Limiting the threat of a major recession must be the priority.’
