Bank of England's MPC elects to hold rates steady at 4.5 percent |
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Published
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Thu, 04 May 2006 19:10
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LONDON - The nine members of the Bank of England's Monetary Policy Committee (MPC) voted to hold the repo rate at 4.5 percent today in a move that was widely anticipated. The interest rates have been put on hold for a ninth month in a row and indications are that instead of a rate cut, the Bank could elect to hike it.
This move could be possible since there is a host of positive data from the UK economy even from the struggling manufacturing sector. The UK housing market is also looking very strong and a recent Halifax survey found that house prices showed the biggest jump in two years. Even the inflation rate has been pegged at i.8 percent, below 2 percent, which has been the Bank's target all along.
"With growth showing no signs of moving above trend and inflation subdued, it is far too early to start talking of increases in rates," said Steve Radley of EEF. "The Bank must continue to keep its finger off the trigger until there is a stronger case for a move in either direction."
Investec chief economist Philip Shaw said that at this point a rate hike could not be ruled out, "There's a growing risk that rates may rise this year. Uncertainty on the future direction is considerable at this point in time, but most evidence is pointing towards a rates rise," he added.
David Frost, director-general of the British Chambers of Commerce said that the MPC had made the right decision, "Given the results of the BCC's recent quarterly economic survey, and the modest improvement in year-on-year Q1 GDP growth, we accept that the MPC has made the right decision today," he added. "But we strongly urge the MPC to maintain a flexible approach, and react quickly to renewed signs of economic weakness."
The Bank had cut the rates by a quarter point in August last year to 4.5 percent.
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