Rate cuts are off the agenda

Fool.co.uk comments on the Bank of England interest-rate decision

The Bank of England left interest rates unchanged today.

The decision is not unexpected given that the twin threat of a slowdown in the UK economy and rising inflation has left the Central Bank with little room to manoeuvre.

David Kuo, Head of Personal Finance at money website Fool.co.uk, says: "The Bank of England has sent a clear signal that it intends to bear down on the fastest rise in the rate of inflation for over a decade.

"Whilst the Central Bank may want to respond to declining house prices, stuttering economic growth and, more recently, weakness in the pound, it cannot afford to take its eye off the rising cost of living.

"However, the decision by the Bank of England to stand firm in its fight against inflation has opened up prospects of more tax giveaways by the Government to soften the impact of the slowing economy.

"But tax cuts and interest rate reductions are strange bedfellows when inflation is rising.

So, homeowners should not bank on a rate cut in the near term.

Instead, anyone on tracker-rate mortgages should try to increase their monthly repayments now to avert a bigger problem later on.

"Tax giveaways can be inflationary, which would heap more pressure on the Bank of England to not only stand firm on interest rates, but to even consider hiking them.".

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