The Bank of England left its benchmark rate unchanged today at 5% following concerns over increased inflation in March, which reached 2.5%. This won’t ease concerns that the UK consumer is about to follow the US consumer into the tank.
Bank of England head Mervyn King has kept Britain’s rate higher than any other industrialized country’s and has cut rates only three times since financial markets started unwinding last summer. But as the economy has begun to falter, King has been subject to the criticisms of a swelling chorus calling for action. Bloomberg:
U.K. house prices had the first annual decline since 1996 last month, growth in service industries slowed to a five-year low, and manufacturing weakened. Concern that a recession is looming may deepen the disagreement among policy makers, who split three ways last month on how fast to cut the benchmark rate as higher oil and food prices stoke inflation.
“Today is about holding for a moment, pausing to make clear they’re not a soft touch on inflation,” Karen Ward, an economist at HSBC Holdings Plc who formerly worked at the central bank, said in a Bloomberg Television interview. “April has really been a turning point for the economy. Things are slowing much more quickly. The dangers are materialising.”