LONDON - True to script, the Bank of England's Monetary Policy Committee has decided to hold the interest rates steady at 4.5 percent today. This move by the nine-member MPC was widely anticipated by analysts especially in the light of the close 5-4 vote last month when the rates were cut by a quarter point.
The British Chambers of Commerce welcomed this move and its director general David Frost said that it was expected, "Following the much-needed interest rate cut in August, it is natural that the committee should wish to assess the situation before taking further action," he said. He however wanted the Bank to signal that it was ready to cull the rate if needed. This possibility could arise especially as the inflationary pressures in the aftermath of Hurricane Katrina have only increased. The rate of inflation scaled 2.3 percent in July and beat the government's expectation of 2.0 percent. The high oil and petrol prices have impacted most businesses adversely and this increase in inflation is bound to hit higher. This could force a rethink by the Bank of England on the matter of holding the rates steady.
Howard Archer, chief economist at analysts Global Insight said that the Bank's decision was predictable, "The committee has made it clear it is currently in no hurry to cut rates further. We are more pessimistic than the Bank of England about growth prospects," he said. Mr. Archer was firm in his belief that the cost pressure plus the poor economic growth would make another rate cut a necessity. Several other analysts have made similar demands and had asked for a double quarter point cut. But the impact of last month's rate cut is not far reaching, Investec analyst Philip Shaw said, "Economic news since the 4 August easing has been a mixed bag and consistent with rates remaining on hold."
Posted
on : Thu, 08 Sep 2005 20:05 GMT | Mortgages News
By : Chris Rowe
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