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British interest rates, monetary policy, unchanged

LONDON: The Bank of England left British interest rates unchanged at 6.00 percent on Thursday, the day after a monthly policy meeting between Chancellor of the Exchequer Kenneth Clarke and Bank Governor Eddie George.

The decision to leave policy on hold was widely expected. Economists said another rate cut so soon after the previous easing in March would have been hard to justify on economic grounds.

"It was absolutely the right decision," said Robert Barrie, UK economist at Barclays de Zoete Wedd, a British investment bank. "The economy looks set to pick up from here and judging by leading indicators for inflation, monetary policy is right where it should be."

Economic growth is widely expected to pick up later this year, assisted by tax cuts due to take effect in April and the three quarter-point rate cuts made since December.

There are already signs that growth has perked up since last year. Consumer spending is creeping steadily upwards with the service sector the main beneficiary.

But the manufacturing sector remains the weak link in the chain. Output growth there is still sluggish, weighed down by a huge overhang of stocks built up last summer.

Economists said if the Chancellor of the Exchequer (finance minister) is looking to make another cut rate, he will use the sickly manufacturing sector as an excuse.

"We think Clarke will try and get one more rate cut in before the data starts to show a strong pick up in growth in the second quarter. He'll use the manufacturing data as an excuse," said Marian Bell, an economist at the Royal Bank of Scotland.

Clarke is considered to be under pressure to make another politically popular rate cut to boost the economy, and the ruling Conservatives', popularity before the next general election. It must be held by May 1997 at the latest.

The Conservative Party is currently trailing behind Tony Blair's Labour Party by around 30 percentage points in the opinion polls.-Reuter