Bank plays long game as loan rate is frozen

THE Bank of England yesterday left interest rates on hold at 4.5pc, prompting speculation that borrowing costs will remain unchanged for months – and perhaps even the next year.

The Monetary Policy Committee’s decision was widely expected after recent data indicated the economy may be slightly stronger than thought.

House prices have bounced back since the MPC cut rates by a quarter percentage point in August.

Inflation is also at 2.5pc – an 81⁄ 2- year high – causing fears that lower rates could allow it to spiral out of control.

But the Bank’s decision disappointed retailers whose sales have suffered over the past 18 months as cash- strapped shoppers tightened their belts.

It also concerned many in the industrial sector. Trades Union Congress chief economist Ian Brinkley said he would have preferred a cut.

He added: ‘Official figures published this week showed that manufacturing output went into reverse in September, falling by 0.3pc on the previous month.

‘Retailers report that trading is still tough. Against this background, interest rates should come down soon.’

The City is split on whether the next move will be a cut or a hike, but markets do not expect movement either way until the New Year. Experts will look for more clues in the Bank’s quarterly inflation report next week.