Bank of England holds interest rates at 5.75%

The Bank of England on Thursday left interest rates on hold at 5.75%, after five consecutive rises in a year. The decision by the Bank reflects a positive situation with inflation falling to 1.9%, below the government's 2% target for the first time in one and a half years. The move also reacts to the current situation with the sub-prime market in the US and its impact on the wider economy. 'The impact on property of this nervousness amongst banks has been to reduce the availability of capital for some leveraged purchasers. To raise interest rates now would add to the worries over sub-prime loans, and raise companies' financing costs further. The Bank will wait to see how this all pans out,' said Tony McGough, head of Forecasting and the Economy at Jones Lang LaSalle.

'Who knows, the sub-prime affair may yet have done the Bank's work for it (removing the froth from the market and reducing the growth in borrowing in the economy) and the need for a rise to 6.0% may well disappear. However, if the sub prime crisis in the US resolves itself quickly with no major overflow into the European economy, then the underlying fundamentals still indicate a rise to 6.0% in the near future.'