LONDON, July 10: The Bank of England kept its key short-term interest rate unchanged at 5.0 per cent on Thursday in the face of high inflation, sliding economic growth and a housing market downturn.

Analysts said Britain’s economy needed a rate cut to boost growth but the BoE had to sit tight for some time because of high inflation caused by record-high oil prices and soaring food costs.

“Inflation risks will make the MPC very reluctant to bring rates down at any time soon and we think the committee will try to ride the situation out for a few months and then cut rates early next year,” Investec Securities analyst Philip Shaw said following the decision.

The BoE’s monetary policy committee (MPC) made the widely-expected announcement on interest rates after its latest monthly meeting.

The central bank will provide reasons for its latest rate call in the minutes of the two-day meeting to be published on July 23.

“Some MPC members are likely to have continued to highlight concerns that high and rising headline inflation could feed into inflation expectations, core prices and/or wages,” said Lehman Brothers economist Peter Newland.

“However, other committee members ... may have raised the issue of the need for rate cuts given the very weak tone to activity data in recent weeks.”

British 12-month inflation hit a 16-year high point of 3.3 per cent in May.

Meanwhile, the economy grew by only 0.3 per cent during the first three months of 2008, the lowest quarterly expansion for three years amid the global credit crunch and a slowing property market.

In addition, weak manufacturing and services sector data published this week pointed towards a potential recession for Britain, economists said.

A further major worry is a sharp downturn in the housing market.

House prices in Britain slumped 6.1 per cent in June compared with the same month last year, the largest annual decline for more than 15 years, home loans provider Halifax said on Thursday.—AFP