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BoE leaves rates on hold
LONDON, England (CNN) -- The Bank of England kept interest rates unchanged on Thursday, as widely expected, with the UK's red-hot housing market showing signs of cooling -- easing concerns over a possible rise in inflation. The BoE has kept interest rates unchanged for 14 straight months due to concern over surging property prices, which has outweighed worries of a weak global recovery. Its key rate has been at a 38-year low of 4 percent since November 2001, which has helped to fuel consumer spending and house purchases -- both of which have shielded the economy from the worst of the global economic slowdown. The BoE has held the line on borrowing costs even as the European Central Bank and the U.S. Federal Reserve lowered their key rates by half a percentage point in December. The ECB also kept its key rate on hold on Thursday. (Full story) announced on Thursday was its was e decision for this month at 1245 GMT on Thursday. The decision to keep UK rates on hold was foreshadowed last week when BoE Governor Eddie George said that even though the UK economy had been recovering more slowly than expected, inflation should remain near the BoE's target of 2.5 percent.
He also said there are no signs that the property bubble would burst any time soon. "As far as the UK economy is concerned we are liable to see growth around trend over the next couple of years and inflation [will be] fairly close to target," he said on Friday in an interview with CNN. The economy grew by 0.9 percent in the third-quarter of 2002, while Germany -- the region's biggest economy -- expanded by 0.3 percent and No. 3 France grew by 0.2 percent. George played down concern over a possible crash in the housing market, saying given the economic outlook for the UK "I actually think that is unlikely." "I think it would be worrying if they [house prices] continued to rise at the pace they did in 2002. This year we estimate that there will be a slowdown in the rate of increase," he said. "If house prices rose by 10 percent or even less that would be consistent with a moderation in the rate of growth of consumer spending, which we expect to see that consistent with a pickup in global demand." UK house prices rose 1.7 percent in December, for an annual increase of 25.3 percent and the highest level in more than 13 years, the Nationwide Building Society said on Thursday. The average house price increased in value by £23,662, or £65 a day, in the past year, the society said. The average house is now worth £117,206.
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