BOE cut interest rates by 0.25% to 5.00%
10 April 2008
As widely expected, the Bank of England elected to cut interest rates by 0.25%, lowering the Base rate to 5.00%. This was the third rate cut in five months from the MPC, who continue face the dilemma of slowing growth and persistent inflationary pressures.
Recent data from the Halifax, the UK’s largest mortgage lender, is likely to have swayed the BoE’s view toward a cut, after annual house price growth was reported at its lowest rate in 12 years. House prices fell 2.5% in March, the steepest fall since 1992, inviting parallels with the 1990’s housing slump. However, with UK inflation currently running at 2.5%, its highest level in nine months and well above the BoE’s 2.0% target, rising commodity prices and depreciating Sterling, inflationary pressures continue to be stoked. The MPC will therefore be restricted in its monetary easing going forward.
As always, the market will look towards any accompanying statement followed by the release the minutes from today’s meeting in two weeks time to gauge how serious policymakers regard recent inflationary pressures and whether or not there is scope for further monetary easing.