Press Release

Forimmediate release

Thursday8 May 2003

Bank's decision on interest ratesjustified, says IoD

The Institute ofDirectors (IoD) said that it was not surprised by today's decision by the Bankof England to leave interest rates at 3 %. But, while it understood thedecision, the IoD said it did expect further reductions later this year.

The IoD said that themanufacturing sector still seemed to be weak, despite Februarys surpriseincrease in the official data; survey material continued to show anunder-performing sector. The sector had been in recession for about two yearsand, given the poor world outlook, was unlikely to recover in the near futuredespite the weaker pound (against the euro). Retail sales growth has slowedsignificantly and consumer credit increases, at last, seemed to be weakening onan underlying basis though month-to-month data are erratic. In addition, therewere increasing signs that the housing market has come off the boil especiallyin London and the South-East.

Ruth Lea, Head of thePolicy Unit at the IoD, said:

"This monthsdecision by the Monetary Policy Committee to leave rates unchanged does notsurprise us. But we expect further easing later this year. There is littledoubt that the global economy is in the doldrums with the major economies allhaving deep-seated problems, which the successful outcome in Iraq will notresolve. The end to hostilities should certainly help the world economy butit wont cure its problems.

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The poorinternational outlook continues to drag the British economy down. Moreover,domestically, consumer spending and the housing market, the parts of theeconomy that underpinned growth last year, do now seem to be moderating. Andthe tax increases will damage business and consumer confidence. The hugeincreases in public spending will, however, support GDP growth. But, on balancethese factors are contributing to slower growth.

Ends 8.5.03 No.167

Note to Editors

The IoD (Institute ofDirectors) is a non-party political independent organisation with around 55,000members. In addition to its wide range of business services, the IoD providesan effective voice to represent the interests of its members to government andkey opinion-formers. It also brings he experience of business leaders to bearon the conduct of public affairs.

Contact Points:

Ruth Lea, Head of thePolicy Unit, tel: 020 7451 3291

Graeme Leach, ChiefEconomist, tel: 020 7451 3366

Richard Taylor, PressOfficer, tel: 020 7451 3264

mobile and out of hours: 07721 734886

David Marshall,Director of Public Affairs, tel: 020 7451 3263

mobile and outof hours: 0776 4883420

email: press@iod.com

web: www.iod.com