Bank urged to peg rates

Interest rates should be kept on hold until more information about the economy becomes available, the Bank of England was advised today.

The Shadow Monetary Policy Committee, a group of economists who meet quarterly, said the economic situation was now highly uncertain and rates should be kept on hold in the short term.

"Whether the next change should be up or down is not yet clear," the SMPC said.

The SMPC added that it agreed with the decision by the Bank of England's Monetary Policy Committee - responsible for setting interest rates each month - to cut the cost of borrowing in the aftermath of September 11.

The Bank cut rates by a quarter point on September 18 and by another quarter point on October 4 - meaning rates are now at their lowest level for 37 years, at 4.5%.

The SMPC's view follows a recent report by the National Institute of Economic and Social Research, which said unless the economic situation worsens further, there was no need for the Bank to cut rates further.

However, economists are broadly expecting the Bank to cut rates by another quarter point when it meets again this month.