Interest rates on hold
The Bank of England Monitory Policy Committee (MPC) today held the base rate of interest in the UK at 3.75 per cent, leaving the rate at a 48 year low.
However some economists predict policymakers may still lower interest rates in coming months.
The meeting was also significant as Governor Sir Edward George has now cast his 74th and last vote on the MPC before stepping down at the end of the month.
Bank of England deputy Mervyn King will take over from Sir Edward as governor at the end of June.
Minutes from last month’s MPC meeting revealed the tightest vote in two and a half years – five members voted for rates on hold while four voted for a cut. That led many to predict at the time that a cut might be just around the corner.
But a Reuters poll conducted last week found 30 of 40 economists predicted rates would not change on Thursday. Upbeat data released since then on house prices, retail sales and services sector business have made a cut even less likely.
This was backed up by the median forecast of 39 economists survey by Bloomberg News.
“This month’s decision by the Monetary Policy Committee to leave rates unchanged does not surprise us. But we expect further easing later this year,’ said Ruth Lea, policy unit head at the Institute of Directors.
Liberal Democrat Shadow Chancellor, Matthew Taylor warned that the Chancellor, Gordon Brown was in danger of dereliction of duty by ignoring the problem of a two-speed economy.
Mr Taylor commented: ‘The Bank of England is torn between the desperate need to deal with the collapse in UK investment, and fear of stoking rising consumer and house prices.’
He continued: ‘The Chancellor’s long awaited announcement on the Euro on Monday, must include his plans to rebalance the British economy, or he will be in dereliction of his duty to British business.’
Governor Sir Edward George has voted with the majority at his last 73 meetings and analysts say he is not likely to have broken with tradition for this last fixture.
It was the first MPC meeting for former Financial Times (FT) editor Richard Lambert, who replaces the dovish Christopher Allsopp who stepped down last month.
Analysts said while there was plenty of opportunity for members to cross the floor and tip the MPC in favour of a cut, it was also not likely that Mr Lambert would vote against the majority, at least not at his first meeting.
Elsewhere, the European Central Bank announced this lunchtime that it is to slash eurozone interest rates by half a percentage point to 2% amid deflationary concerns.
