Threat of 6% interest rates 'is receding'

THE threat of interest rates rising to six per cent has "probably receded", the Bank of England's Monetary Policy Committee said today.

It was revealed that members of the rate-setting body voted unanimously to keep rates on hold at 5.75 per cent earlier this month, amid concern over turmoil in the world's financial markets.

The minutes suggested that the Bank foresaw some of the market disruption which has rocked UK banks and building societies in recent days.

The MPC said the risks to inflation outlined in its August quarterly inflation report - which pointed to the need for a possible further rate rise to six per cent - had now "probably receded".

But it added that the outlook for inflation was "more uncertain" given the global credit crunch and potential knock-on effect on the wider economy.

However, there was little in the minutes that revealed the MPC's thinking on a possible rate cut, accept that it was monitoring credit markets "closely".

Inflation figures yesterday showed that inflation had fallen again, to 1.8 per cent, reinforcing the view that the Bank of England has room to cut rates if needed.