The Bank of England (BoE) recently announced that it has held base rate at 5% for the fifth consecutive month.

The BoE’s Monetary Policy Committee (MPC) was faced with a difficult balancing act as inflation increased to 4.4% in July and the economy continued to slow. In August the Governor of the BoE, Mervyn King, said that he expected inflation to rise further, peaking at 5% towards the end of the year. King also said that he believed growth would be flat and that he did not rule out the risk of recession. More recently the Chancellor of the Exchequer, Alistair Darling, was quoted as saying that the economic conditions were arguably the worst they had been for 60 years. If the economy continues to deteriorate, the BoE may be forced into cutting the base rate in an attempt to stimulate economic growth.

James Thomas, head of residential development and investment at Jones Lang LaSalle, told PIN: “It is no surprise that the base rate was held today as the MPC is in a tricky position. We see the likelihood of the holding of interest rates until the end of the year, with cuts following as the rate of inflation slows providing some respite for home owners.”