MPC split on interest rate freeze
Wednesday, 21 December 2005 12:00
The Bank of England's interest rate setting Monetary Policy Committee (MPC) was split in its decision to hold interest rates at 4.5 per cent in December.
While the result of their vote was described as "one of the easiest ever to call" by economists, the MPC itself seems to have had more of a debate about it.
In the end the MPC voted eight to one in favour of a rates freeze, with Stephen Nickell voting for a 0.25 per cent cut in interest rates.
It is the first split vote since August's rate cut, and will add to speculation that interest rates are set to fall in the first three months of 2006.
For the most part the committee members seemed content to wait for more concrete data on wages and retail over the Christmas period and new year before re-assessing the predictions they made in November and voting to change rates.
But for Mr Nickell, a former professor of economics at LSE, predictions for investment growth and net trade seemed optimistic.
Additionally, the minutes state that he felt there were hints of a subdued outlook for investment, a slowdown in government consumption spending, that pipeline inflation pressures were easing, and there were no signs that the rapid rise in oil prices and tax rates since early 2004 had fed through into wages.
This move to a split vote has seen economists predict that a cut in interest rates could be on the cards when the Bank next completes its quarterly inflation report in February.
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