This decision was possibly the most publicised and talked about of any during that period of stability. Because the US have just slashed their interest rates by half a percent and influential figures in various quarters vocally encouraged the MPC to follow suit. But it wasn't to be, and we look at some of the reasons that may have contributed to the 'non-decision'. We then hear the views of some of those campaigning for a rate reduction and finally, we take a look at some of the predictions for what will happen to the economy and the housing market over the coming months. This is unprecedented in the last 30 years.
Unemployment is low and inflation is below government targets - and has been for some time.
All of this builds an environment which could lure the government to take a few 'risks' with the economy, in a bid to win votes in the run up to a General Election. Increased spending and reductions in taxes are both commonly used electioneering tools, both of which have potentially inflationary effects. Chancellor Gordon Brown has already pledged his commitment to tax cuts for pensioners and families with children, with further cuts possibly in the pipeline to sway key voter groups. This should be fine as long as the economy is slowing. But if the economy remains healthy, overspending by the government could lead to increased household expenditure and borrowing, with the knock-on effect being rising inflation.