Bank of England policymakers announced today they had opted to keep interest rates unchanged at their monthly meeting, with analysts saying the pound's recent plunge had most likely stayed their hand. Interest rates would remain at 3.75%, the 48-year low to which they were lowered in February, the bank said.
No official comment was made and the reasons for the decision will not be revealed until May 21 when the bank's monetary policy committee publishes the minutes of today's meeting.
Shortly afterwards, the European Central Bank in Frankfurt announced it was holding its key interest rates steady at 2.5% at a monthly policy-setting meeting.
Over recent weeks a series of economists had forecast that British policymakers might push through a 25-basis-point reduction so as to give a boost to sluggish economic growth. However over the past few days the decision was considered too close to call after the pound plummeted to its lowest level for six years against an index of other currencies.
Sterling is currently hovering around the 71-pence level to the euro, only just short of its record low of 71.85 pence.
The UK economy has been helped in recent weeks by the pound's fall, making British firms more competitive internationally, as well as by post-Iraq war factors such as a drop in global oil prices.
But business groups, which had pressed the bank to cut rates urgently to boost economic growth, reacted with dismay to the news. The Confederation of British Industry said it was disappointed by the decision.
However the MPC was known to be concerned that already above-target inflation could rise if the pound slid further, making imports more expensive.
Inflation, according to the government's preferred measurement, was at a 3% annual level pace in March and February, well above the 2.5% official target. Analysts said that overall, MPC members probably felt that the slipping pound had done their work for them.
