THE Bank of England’s Monetary Policy Committee (MPC) yesterday held interest rates at a record low 0.5 per cent after ignoring calls to head off inflation with a rise in borrowing costs.
Commenting on the rates decision, Unison general secretary Dave Prentis said: ‘The Bank of England has made the right decision by keeping interest rates low, but inflation is hitting people hard.
‘The vast majority of Unison members have not had a pay rise for two years and rising inflation is what is hitting families hard. The price of everyday goods such as food and fuel are going up, and just making ends meet is a real struggle.
‘However, interest rates aside, the government must re-think its damaging cuts strategy and concentrate on stimulating growth to preserve and create much needed jobs.’
The MPC held rates amid concerns that growth in the UK economy is running out of steam and that a rise in rates would strangle the recovery.
A measure of UK service industries fell to 54.3 in April from 57.1 the previous month, Market Economics and the Chartered Institute of Purchasing and Supply said.
Last week, the Office for National Statistics confirmed that the annual rate of GDP growth in the first quarter of 2011 was a minuscule 0.5 per cent.
That marked a recovery from the 0.5 per cent fall in the final quarter of 2010 but revealed that Britain’s economy had stood still for six months.
Analyst Howard Archer of IHS Global Insight said that the rates decision ‘reflects current serious concerns and uncertainties over the state of the economy and its ability to withstand the fiscal squeeze that increasingly kicked in from early April’.
Meanwhile, 4,000 more workers face losing their jobs after the Focus DIY chain went into administration on Wednesday after being hit by the weak housing market and low consumer confidence.
Simon Allport, one of the joint administrators from Ernst & Young, said: ‘Despite management’s actions to tightly control costs and restructure the operations, unfortunately it has not been possible for the business to continue to trade outside of insolvency.’
l The European Central Bank held the main eurozone interest rate at 1.25 per cent yesterday.
Portugal is meanwhile heading for two years of a 2.0 per cent contraction under the 78bn euro debt rescue, Finance Minister Fernando Teixeira dos Santos said.
IMF chief Dominique Strauss-Kahn and EU Economy Commissioner Olli Rehn warned yesterday that the Portuguese people must deliver ‘truly national’ and ‘major efforts’ in exchange for the bailout.
