"The minutes from the March MPC minutes (which revealed that 8 MPC members voted to hold Bank Rate at 5.25%, and one member voted for a 25 basis points cut), strengthens our belief that there will be no increase in rates this month. At the same time, we acknowledge that inflation is still a danger, and the MPC may have to take further action. CPI annual inflation rose to 2.8 per cent in February, and there are still uncertainties relating to the current wage round.
It is important that the Government responds firmly to excessive public sector wage claims. But UK wage pressures remain under control so far. Moreover, the appreciation in sterling’s effective exchange rate over the last few weeks, provides a powerful argument against immediate monetary tightening.David Kern concluded: "We continue to believe that the cumulative effect of three interest rate increases, implemented since August 2006, will dampen down the UK economy. A slowdown in the pace of UK growth is likely later this year, even if Bank Rate stays at 5.25%. A further increase in interest rates at this time, coming after the disappointing Budget, could cause serious damage to the UK economy in general, and to small businesses in particular. We strongly urge the MPC to keep rates on hold in April."