Decision to hold interest rates unanimous, say MPC minutes |
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Thu, 24 Nov 2005 06:55
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LONDON - The Bank of England's Monetary Policy Committee did not feel the need to discuss any further rate cuts and voted unanimously to keep the rate unchanged in its November 10 meeting, the minutes showed.
The MPC also looked at the central bank's quarterly Inflation Report and pointed out that it did not feel the need to change the interest rates, which have been held steady at 4.50 percent since August this year. The MPC had narrowly voted 4-3 in favor of a quarter point rate cut that month, but the minutes showed that the Bank's Governor Mervyn King was not in favor of the cut.
The minutes to the November 10 meeting, which were released today, showed that the MPC has not been able to identify any second-round effects on pay or on medium-term inflation expectations. However, it said that these effects were being closely monitored. "There was a range of views among individual members concerning the likely pace of demand growth over the forecast period," the minutes said.
"Some members believed that the balance of risks to GDP growth was weighted slightly more on the downside in the second half of the forecast (two-year) period." The minutes added that January was an important month for private sector settlements and the same would be closely tracked.
The MPC noted that even though corporate profits were robust, there was a subdued intention prevailing in the markets and that low level of long-term interest rates had failed to enthuse them. The MPC also said that the retail sector gloom somewhat offset the thriving housing market, "Somewhat stronger retail sales and housing market indicators contrasted with weaker car sales and consumer confidence data," the MPC said. It also said that it continued to remain confused over the strong sentiment prevailing in the employment sector even as output was falling.
Commenting on the minutes, Howard Archer at Global Insight said, “We believe that the Bank of England is still too optimistic in its growth outlook, while latest data relating to consumer price inflation, producer prices and wages earnings growth have all been reassuring. Consequently, we believe that a 25 basis point interest rate cut in February remains a very realistic possibility.”
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