Bank of England Keeps Key Rate Unchanged at 5.75%

The Bank of England kept its benchmark interest rate unchanged at a six-year high, with policy makers resisting calls for a cut on concern that rising oil and food prices will fan inflation.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, left the bank rate at 5.75 percent, as predicted by all except three of the 61 economists surveyed by Bloomberg News. Most expect a reduction in February.

The decision suggests contagion from the U.S. subprime mortgage market slump, which sparked the first run on a U.K. bank in more than a century, has yet to outweigh policy makers' concerns about inflation. The Bank of England's reluctance to follow the Federal Reserve in cutting rates sent the pound to a 26-year high against the dollar today.

``They're in `wait and see' mode,'' said Neil Mackinnon, chief economist at hedge fund ECU Group Plc in London and a former U.K. Treasury official. ``We are in for an economic slowdown that will become more apparent as we go into the early part of next year and that's when they are likely to cut. We may even move towards a recession.''

The U.K.'s benchmark is the highest among the Group of Seven industrialized nations. The Fed has cut its key rate 75 basis points since September, to 4.5 percent. The European Central Bank kept its key rate at 4 percent today, as predicted by all 61 economists surveyed by Bloomberg News.
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