The Bank of England has kept official interest rates steady for a second month running today against a background of credit market turmoil that has already sent the cost of borrowing shooting upwards.
Analysts had predicted the bank would leave rates at 5.75% after raising them five times since August 2006, and many think rates may have now peaked.
However, a significant minority still forecast a rise to 6% later this year as most data still points to a strong economy and policymakers have been worried about inflation.
A lot will now depend on how much the market jitters spill over into the real economy, analysts said today.
A global credit crunch has already sent the cost of money shooting up over the last month without the BoE's nine-member Monetary Policy Committee lifting a finger.
Normal lending between banks has dried up. On Wednesday, they were charging each other 6.8%- a full percentage point above the BoE lending rate and the highest in 8-1/2 years- for three-month loans.
Financial institutions that only months ago were competing with each other to offer huge incentives to bring in new borrowers are now looking to savers to boost their cashflow.
Some banks have been offering interest rates of as much as 8% on ordinary savings accounts.
