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Interest Rates Stay At 5%

Homeowners seeking a cut in borrowing costs have been left disappointed after the Bank of England held interest rates at 5%.

Members of the Banks Monetary Policy Committee have been put under pressure to make a cut following a flurry of poor economic news.

City economists expect the next cut to be made next month in June, with policymakers reluctant to do so because of fears that oil and food prices will raise inflation above 3%.

The Bank faces a balancing act between controlling inflation and maintaining economic growth.

Findings earlier this week revealed that activity in the sector slowed to its lowest level since 2003 as firms such as hotels and restaurants felt the rising costs and a fall in new orders.

There was also a surprise fall in manufacturing output, with a 0.5% decline not expected to occur this month.

Further pressure was piled on the Banks Monetary Policy Committee after the housing market showed further signs of a downhill slide.

House price growth turned sour during April for the first time since 1996, with house prices now 0.9% lower than they were in April last year, according to findings from Halifax.

One of the MPC's nine members, David Blanchflower, gave his thoughts last week after saying "aggressive action" was needed to prevent the UK economy falling into recession.

Philip Shaw, chief economist at Investec Bank, said the decision showed the Banks Monetary Policy Committee remained concerned about inflation. Bank of England governor Mervyn King has to write to Chancellor Alistair Darling if inflation rises above 3%.