BoE decision to hold rates 'was unanimous'
A further cut in interest rates before the New Year looked unlikely today after it emerged that the Bank of England voted unanimously in favour of a hold again.
Minutes from the meeting of the Monetary Policy Committee (MPC) two weeks ago showed that all nine members were in favour of pegging rates at 4.5 per cent – a decision widely expected in the City.
It was the third month in row that there was no split among members over the direction in which the cost of borrowing should go.
The decision coincided with the Bank’s quarterly Inflation Report, which signalled an uncertain short-term future but a positive long-term projection.
The Consumer Prices Index (CPI) measure of inflation fell to 2.3 per cent in October from 2.5 per cent in September as the price of petrol retreated from its record highs.
The MPC noted that inflation was on course to be close to the two per cent target in two years’ time.
But today’s report said that there was “considerable uncertainty” about the impact of higher energy prices on inflation.
It added that output growth in the UK was “a little weaker” than predicted by the MPC in August, although “there were signs that output growth in the second half of the year would be a little stronger than in the first half”.
Analysts have already downgraded Chancellor Gordon Brown’s prediction of three to 3.5 per cent growth for the year to below two per cent, with some forecasts as low as 1.6 per cent.
The MPC said current spending indicators were “mixed”, with stronger retail sales and gains in the housing markets contrasted with weaker car sales and a dip in consumer confidence.
The report said: “Looking ahead, output growth strengthened gradually under the central projection, while inflation was close to target two years or so ahead.
“The risks around those central projections were evenly balanced, but there was more uncertainty than usual about the near-term profile inflation.”
In August, the MPC voted to cut interest rates by 0.25 per cent to stimulate economic growth – the first cut in two years.
