CALLS for further reductions in British interest rates are given short shrift by a Bank of England concerned that continued relaxation of monetary policy could undermine the quest to obtain price stability over the medium term. In its latest quarterly bulletin, the bank says "it is not easy to see the case for lower interest rates". Warning the government to avoid past mistakes, the Bank says the apparent short-term weaknesses in some sectors are masking signs of more buoyant future activity.

The Bank's current projections show there are risks to meeting the target of inflation at or below 2.5 per cent.