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Bank of England Holds UK Interest Rates at 5% July 17, 2008

The UK Bank of England recently voted to hold interest rates at 5%. I believe they had little choice in this decision as any decrease will further fuel the increasing rate of inflation which is now nearing 4%, double the governments target rate. Equally, the Bank of England cannot put the rate up even by 0.25% as the effect on the economy would be devastating. If interest rates rise its likely that businessesand consumers who have large amount of borrowing will not be able to cope and the outcome would likely be a recession.

The Bank of England must strike a careful balance between the threat of recession and the problems brought on by high rates of inflation such as strike action.

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[...] Finance News – All about your finances wrote an interesting post today onHere’s a quick excerpt The UK Bank of England recently voted to hold interest rates at 5%. I believe they had little choice in this decision as any decrease will further fuel the increasing rate of inflation which is now nearing 4%, double the governments target rate. Equally, the Bank of England cannot put the rate up even by 0.25% as the effect on the economy would be devastating. If interest rates rise its likely that businessesand consumers who have large amount of borrowing will not be able to cope and the outco [...]

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