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BoE took 'the wise option' by opting to keep interest rates unchanged - BRC

Thu, Jun 5 2008, 11:33 GMT
http://www.afxnews.com

LONDON (Thomson Financial) - The Bank of England's decision to leave interest rates unchanged at 5.00 percent "was the wise option" given rising inflationary pressures, despite signs of a floundering economy, according to the British Retail Consortium.

Recent evidence has suggested that consumer spending and the housing market are both suffering badly as a result of the credit crunch and the global economic downturn, but the BoE must stick to its mandate of targeting inflation, the lobby group said.

"Struggling customers and retailers certainly need a boost but, with rising oil and commodity prices stoking inflation to well above the 2 percent target, leaving rates unchanged was the wise option," said BRC director general Stephen Robertson.

"Though inflation is being driven by global price rises which will not be affected by keeping UK interest rates high, the Bank could not risk further fuelling inflation by stimulating domestic demand at this stage," he said.

The BoE must not "close the door", however, on cutting interest rates to provide stimulus to the economy "as soon as conditions allow", he added.

jessica.mortimer@thomsonreuters.com

jkm/rw

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