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Interest rates kept on hold

The Bank of England kept interest rates on hold at 4.5 per cent four the fourth month in a row today as it kept a watchful eye on inflationary pressures triggered by the rapid rise in energy bills.
Members of the Bank's Monetary Policy Committee are concerned that firms will start to raise prices to protect profits and their staff will bargain bumper wage rises from next month.

But business leaders warned the MPC must not drag its heels on cutting rates again after lowering borrowing costs in August.

David Frost, director general of the British Chambers of Commerce, said: 'Waiting too long before taking corrective action could be dangerous, and could cause long-term damage.'

Unemployment has risen for nine months in a row and official data released this month showed that manufacturing output fell by a surprisingly sharp 0.7 per cent in October.

Economists said the no-change decision was predictable given the evidence of the November inflation report published by the Bank of England.

Inflation stood at 2.3 per cent in October and MPC members have flagged a string of potential threats in recent speeches.

Investec economist David Page said: 'The MPC is keen to assess pay deals after the New Year and consumer spending over the Christmas period. Only then will it be willing to think about further rate cuts.'

Signals coming from the high street have been mixed so far, with the CBI claiming that retail sales in November fell at their fastest rate for at least 22 years.

But the British Retail Consortium offered a different view, finding that like-for-like sales rose 0.8 per cent on 12 months ago after the recent cold snap set tills ringing at clothes shops.

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