Bank of England Base Rate

Thursday 10th January 2008 - Interest Rates stay on hold at 5.5% after many key retailers call for a reduction in rates due to the slow Christmas and lower turnout of shoopers in the January sales.

The Bank of England are now responsible for setting the base interest rate, this is done once a month and usually on the first Thursday of the month. The purpose of changing the rate or keeping it the same is to keep control of inflation.

If inflation starts to rise, putting interest rates up will curb spending and then in turn help to kurb any increase in the cost of goods. If inflation starts to fall, utting interest rates down will encourage borrowing and spending. The Governements current inflation target is 2%.

At present (December 2007) inflation is starting to decline so the Bank of England are able to decrease rates. It is hoped that rates can drop by as much as a whole percentage point in 2008 to shore up the economy.

You can visit more information abou this by visiting the Bank of England web site which can be found at http://www.bankofengland.co.uk/