Interest rate hold 'widely expected'

Today's decision by the Bank of England's Monetary Policy Committee's (MPC's) not to cut interest rates was widely expected by analysts and industry bodies.

Interest rates were held at 4.5 per cent, with inflation still on target at two per cent and house price inflation expected to rise in the coming months.

Mehrdad Yousefi, head of intermediary mortgages at Alliance & Leicester welcomed the decision, taking it as further indication that the UK economy is on the up again.

"There is renewed confidence in the economy as figures show retailers performed better than expected over the Christmas and new year holiday period. With this upbeat start to the year, the potential downside risk to economic forecasts is lower than previously anticipated.

"Many commentators point to the possibility of base rate cuts in the future and overall brokers, homeowners and first time buyers can look at this year in a positive light."

Many commentators felt the MPC made the right decision for the time being, but did not rule out the need to cut rates in the future.

Trevor Williams, chief economist, Lloyds TSB Financial Markets, said: "The MPC was unlikely to decrease rates today with house price inflation set to rise further in the coming months. Strengthening retail sales, services and manufacturing - and the fact that inflation remains on target at two per cent will also have helped discourage a cut."

He added: "You can only assume that the MPC will not be keen to change things in the short term - unless, of course, something fairly dramatic happens over the coming months."

The Royal Institute of Chartered Surveyors (Rics) also welcomed the decision, attributing it to the gradual recovery of the housing market over the last six months, but warned that the situation was liable to change and a future cut could be on the cards.

"The recovery in the housing market since last summer has been maintained," said RICS chief economist Milan Khatri.

"The number of new buyers has risen for seven consecutive months, while the number of property sales has risen by 13 per cent over the past year. The more positive tone of the housing market has also bolstered spending on the high street.

"However, the Bank of England should examine the need for a spring-time interest rate cut in the months ahead. A recent increase in unemployment could damage consumer confidence.

"The manufacturing sector also remains fragile and has failed to take advantage of a robust global economic climate, therefore inflation pressures in the economy as a whole remain quite muted," Mr Khatri added.