Sterling unchanged after BoE minutes conform to expectations
18 June 2008
It was revealed on Tuesday morning that some of the Bank of England’s Monetary Policy Committee considered hiking interest rates this month, before joining the majority who voted to keep rates on hold at 5.0%. Minutes from the 4-5th June MPC meeting highlighted that the majority of policymakers believed the spiralling inflation situation in the UK had ruled out a case for a cut in the base rate. Following its discussions, the committee voted 8-1 in favour of keeping rates unchanged, with arch-dove David Blanchflower electing for a 0.25% cut.
Some members thought the news over the month suggested that interest rates might need to rise. “If there were a serious threat to medium-term inflation expectations, then a pre-emptive rise in rates would be appropriate” the hawks argued. “Delay would only increase the eventual costs of bringing inflation back to target”. However, for now the MPC felt there were a number of issues preventing the Bank from raising rates, including signs that the credit crunch was still prominent and slowing growth. The majority judged that while official data on consumer spending was puzzling, they still thought economic growth slowed in the second quarter, in line with their May forecast.