Interest rates to stick

Despite warnings from the governor of the Bank of England (BoE), that high retail spending is cause for concern and rates could be raised to choke off demand, rumours that the BoE’s nine member Monetary Policy Committee will raise rates this month to try and slow down spending are thought to be unfounded.

The interest rate cycle is now thought to be at an end, following the cuts from six to four per cent last year, and the frequent calls from industry for further cuts are expected to be ignored.

Ian McCafferty, chief economic adviser at the CBI, said: "Retail sales growth is still healthy but has slowed since the Christmas high. Retailers are expecting growth to slow further - orders placed with suppliers are weakening and wholesalers expect business will continue to be well below average. Until the global economy begins to pick up, the UK economy needs consumer spending to remain strong. With inflation low there are good arguments for a further rate cut to guard against the current uncertainty."

But, most commentators outside of Industry disagree.

James Mayne, strategic development at britannicmoney, said: "We do not expect a change to interest rates in today's announcement. It is likely that the MPC will want to see the outcome of public spending on the high street before making their next move. The retail figures that were released for December were lower than expected and along with strong house price growth reported for January it is therefore likely that the rates will remain at their current level certainly for the short term."

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