Time Not Right for Rate Cut, says IoD

9 February 2006

Business leaders welcomed today’s decision by the Bank of England to leave interest rates on hold at 4.5%.

Whilst supporting the Bank of England’s caution, the Institute of Directors (IoD) said that there is enough spare capacity in the economy to permit a cut in rates before the Summer.

Graeme Leach, Chief Economist at the IoD said:

“There is just too much uncertainty at present about the economic outlook, for the Bank of England to make a decisive move. Inflationary pressures appear to be under control but the risk of second round effects from the surge in energy prices has not gone away completely.

“Also, any immediate cut in interest rates risks re-igniting the housing market, something we don’t want to see when the house price income ratio remains at record levels. Overall though, the sensible bet is that there will be a rate cut by June of this year.”