Bank keeps interest rates on hold

The Bank of England has today opted to keep interest rates at 4.5 per cent for October.

It is the second consecutive month that the Bank's interest rate setting Monetary Policy Committee (MPC) has frozen the underlying cost of borrowing in the UK.

In line with other analysts' expectations, Global Insight's Howard Archer described the rates freeze as a "nailed-on certainty" yesterday.

A rate cut benefits homeowners as borrowing becomes cheaper, while a rise has the opposite effect and can inhibit the market.

The Bank raises and lowers the cost of borrowing in the UK in bid to keep inflation as close as possible to its target of two per cent.

Mr Archer noted: "We continue to believe that the Bank of England is too optimistic about future growth; and perhaps significantly [MPC members] Stephen Nickell, David Walton and Richard Lambert have all acknowledged recently that there are serious downside risks to the central bank's growth forecast, particularly stemming from persistently subdued consumer spending."

He believes another rate cut could happen as soon as November, but that it may well be delayed until the early part of 2006.

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