| MPC was unanimous in deciding to hold interest rates steady |
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LONDON - The Bank of England's monetary policy committee's decision to keep the interest rates unchanged was unanimous, according to the minutes of the meeting released today.
This decision was surprising especially after the close vote in August, which brought a change in the interest rates form 4.75 percent to 4.50 percent. However, the members were concerned about the rising oil prices, "There remained a risk that oil prices would rise further. This posed an upside risk to the inflation projection," the minutes said.
Oil prices have spiraled through the roof in the last 12 months and have risen by more than 50 percent in the aftermath of Hurricane Katrina and have only recently stabilized. Summing up the MPC's response to the oil conundrum, John Butler of HSBC said, "The MPC had a separate section on oil prices and the implications for monetary policy, reflecting the fact that the rise in oil prices has provided the committee with their biggest surprise since the August inflation report."
The Bank estimated that if the interest rates remained at 4.5 percent, then the inflation would continue to hover around the 2 percent mark. But Stephen Nickell and David Walton, two members of the MPC have acknowledged that this forecast is a tad too optimistic and that growth could indeed fall short of this target.
Howard Archer of Global Insight admitted that the prospects of another rate cut looked bleak, "The 9-0 vote in favour of unchanged interest rates and the overall tone of the minutes indicate that the Bank is very much in wait and see mode regarding inflation and growth developments." He added that he was hopeful of another rate cut this year though it was looking increasingly likely to be delayed until early 2006.
Posted
on : Fri, 23 Sep 2005 03:35 GMT | Banking News
By : Mark Richardson
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