BoE panel minutes fuel speculation on interest rate cut |
|
|
Published
:
Thu, 23 Jun 2005 09:35
|
LONDON: The fact that at least two policy makers have suggested lower borrowing costs has fuelled speculation of a possible cut in the interest rate by Bank of England. The minutes of a meeting of the monetary policy committee of the bank on 8 and 9 June showed that Charles Bean, chief economist and Marian Bell, an outgoing member, had voted for a quarter-point rate cut, suggesting it is needed to reverse the consumer slowdown.
The information led to a record jump in the interest futures of sterling since February 2003.
The other seven members of the committee, however, recommended that the interest rates be left at 4.75 per cent for the 10th month in running as they saw the risks involved in lesser household spending and the rising inflation have not been resolved. The majority prevails for the time being.
The seven members were of the opinion that "There was time to gather further evidence on the depth and extent of the slowdown in consumption to see if lower interest rates were warranted."
The committee also appeared to be worried over the global scenario, in the light of the half-point rate cut implemented by Sweden Tuesday. It feels the prospects of European economy have worsened in recent weeks. They also felt there is no change in the inflation outlook even as the spending growth has somewhat stabilized, although at a low level.
Bank of England's Governor Mervyn King had said last week that the committee has to maintain the balance between risks flowing from inflation and the possible slowing down of consumer spending.
As the minutes were published, sterling fell sharply. The euro too had a significant drop amid speculation that the European Central Bank is envisaging a rate cut.
Analysts have opined that the minutes are indication for a possible rate cut as early as August.
The speculation led to the dollar gaining strength against most of the European currencies and also against the yen, although earlier in the day it had dropped against the Japanese currency following news that U.S. Federal Reserve chairman Alan Greenspan and treasury secretary John Snow would testify before lawmakers on China's currency stance. The euro went down 0.4 per cent at $1.2124, while the sterling recorded a similar dip at $1.8218.
|
|
|
|
|
|
Print this Story
