Bank freezes rates at 4%

THE City barely blinked when the Bank of England bowed to expectations and kept interest rates at 4%. The decision by the Bank's monetary policy committee was seen as a compromise at a time when High Street spending is growing by 7% a year while manufacturing is shrinking by 4.5% - the widest gap for more than 20 years.

Following the midday announcement, the FTSE 100 index was down 32.1 points. It ended the day 37.8 points off at 5190.7, while sterling was almost half a cent weaker at $1.4430.

Stephen Radley, chief economist at the Engineering Employers' Federation, said: 'With unemployment set to rise, inflation in check and significant parts of the economy slowing, raising rates should be well off the radar.'

Earlier, Government figures showed company profits remained stable at 12.2% in the third quarter of 2001, but manufacturers' returns remain depressed at just 4.3%.

The British Retail Consortium said shop prices in December were 0.11% higher than a year earlier but remained at the same level as in November. The year-on-year increase reflected rising food prices, and prices of non-food items fell.

BRC director-general Bill Moyes said: 'This confirms that the high sales growth of 2001 has not generated inflation.'