UK rate cut looking unlikely after committee report
A pre-Christmas cut in interest rates looked unlikely today after the Bank of England declined to discuss the case for lower borrowing costs this month.
All nine members of the Monetary Policy Committee (MPC) voted to keep rates frozen at 4.5% – the second consecutive month without dissent.
Although some MPC members were convinced that the risks to consumer demand had grown, these fears were offset by the dangers posed by inflation and oil prices.
The Consumer Prices Index measure of inflation had risen to 2.4% to be even further away from the MPC’s target of 2% in two years’ time.
The MPC was also alert to higher oil prices having a knock-on effect on wage deals and inflation expectations in the medium term, although there was little sign of this happening at present.
The report said: “If such effects were to take hold, the committee would need to run a tighter monetary policy than would otherwise have been the case.”
The MPC felt the November inflation report would provide a clearer picture of the UK economy.
If the oil price did not rise further then its impact on inflation “was likely to fade towards the end of the year”, the report said.
Economic growth in the UK continued to be sluggish during September, although the MPC voiced concerns about the reliability of official data.
Business surveys were at odds with official figures that found the service sector slowing more sharply than expected.
This deceleration in the service sector led to the annual rate of GDP growth being revised lower by British government statisticians.
