Bank of England holds interest rates

The Bank of England has voted to keep interest rates constant at 0.5% for another month.

Amid worries over consumer spending levels during the fourth quarter of 2010, retailers will be relieved that the cost of borrowing will not be raised.

Stubbornly high inflation had caused many to suspect that the rate level would be increased. 

“What putting up rates would do, is to increase household mortgage and loan costs thereby dampening consumer demand for retail and other goods”, said Neil Saunders, consulting director of Verdict Research.

“At this time, higher interest rates would have a negative overall impact on the economy – something the Bank will be keen to avoid," Saunders added.

Meanwhile, January retail sales were 2.3% higher on a like-for-like basis than the same month in 2010, according to the British Retail Consortium, with total retail sales 4.2% ahead of a year ago, when stores were hit by heavy snow.

However internet, phone and mail order sales growth fell back to 12.3% in January, from 18% in December.

“On the surface, this is the best sales growth since last March, but that’s not the whole story. Comparisons are with a feeble, snow-hit performance a year ago," said BRC director general Stephen Robertson.

“Turning round consumer confidence is central to turning round the economy. A range of pressures is bearing down on customers. As it considers the Budget the government must not add any more," Robertson added.

Lucy Shaw, 14.02.2011