MPC minutes point to interest rate hold
Wednesday, 25 January 2006 12:00
The Bank of England's interest-rate setting Monetary Policy Committee (MPC) is unlikely to cut interest rates in the near future.
The minutes of the MPC's January meeting, released today, point to the current interest rate of 4.5 per cent being maintained for some time to come.
Last month one member of the nine-strong committee voted for an 0.25 per cent cut in interest rates, and with a major Bank report out next month and concerns that high oil prices might push up wage settlements in January, economists had predicted that rates could fall as soon as February.
But in the minutes of the MPC's January meeting, no one else joined Stephen Nickell in calling for a reduction in base rate, and most members of the committee felt the economy was stable for the near-term at least.
The MPC raises and lowers the base rate of borrowing in the UK - affecting millions of mortgages and savings accounts - in an attempt to keep inflation as close as possible to the government's two per cent target.
The minutes state: "It seemed likely that inflation would be broadly in line with the target over the medium term."
There were "few signs of second-round wage pressures related to higher oil prices", they add.
This has led analysts to push back the date they believe interest rates will fall - with some claiming interest rates are set to remain at 4.5 per cent for the rest of the year.
Howard Archer, chief UK economist at the consultancy firm Global Insight, commented: "There is little indication from the minutes that any other members of the MPC were leaning towards a near-term interest rate cut in January as it was noticeable that the minutes did not repeat December's comment that 'some members remained of the view that the risks to the central projection for GDP were weighted somewhat to the downside'."
However he maintained that interest rates were set to fall in the months to come.
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