September 08, 2006	Friday	Sha'aban 14, 1427

LONDON, Sept 7: The Bank of England held its key interest rate at 4.75 per cent on Thursday, opting against a further rise after last month’s surprise quarter-point increase. The BoE decision had been widely predicted by economists and came after it had unexpectedly increased borrowing costs in August from 4.50 per cent.

"Today's decision is no surprise," Investec Securities economist Philip Shaw said. "The MPC really would have wanted to avoid surprising the markets in two successive months."

However Shaw, in common with a number of other economists, is predicting an increase to 5.00 per cent in November, citing strong growth and inflation.

The European Central Bank is expected also to raise eurozone interest rates at least once more this year, while the outlook is less certain for US and Japanese borrowing costs.

Sterling and London's FTSE 100 index of leading shares, falling already ahead of Thursday's announcement, extended slightly their losses following the rate freeze.

Britain’s financial markets are being pressured by uncertainty surrounding the future of embattled British Prime Minister.

The BoE's monetary policy committee (MPC) gave no explanation for its latest move, as is customary when no change is made to the "repo" rate -- the rate of interest at which the central bank lends to commercial banks.

Markets must wait until September 20 for official comment, when minutes from the latest two-day meeting are released.

BoE policymakers had last month voted 6-1 in favour of hiking borrowing costs for the first time in two years to help control British inflation and dampen the nation's economic growth.—AFP