| UK
Interest Rate: 5.5%
UK
Interest Rates Forecast: Cut seen as likely by many in
February
MPC
Vote 8-1 for January Rate Hold
When
the Bank of England's Monetary Policy Committee decided
to keep rates on hold in January, many analysts believed
it was a finely balanced decision - assuming several members
of the MPC would have wanted a cut.
It
turns out they were wrong. Eight of the nine members of
the MPC voted to leave rates unchanged,
according to the minutes of the January meeting, published
this week. Only one dissenter, American David Blanchflower,
voted for a cut of 0.25% on the grounds that the risk
of a sharp global slowdown had increased considerably,
making a cut appropriate.
This
result seems to suggest that the case for a cut in February
- widely expected - is not as strong as previously thought.
Inflation
Concerns Persist
As
in previous months, the MPC's main concern when considering
changes to the Bank's interest rate has
been inflation. The government's preferred CPI measure
of inflation has remained stubbornly at 2.1% in recent
months - above its 2% target.
The
minutes of January's MPC meeting confirm that this is
one of the Bank's major concerns. Stating that the short-term
outlook for inflation had "worsened markedly",
they observed that rising energy prices - including gas
and electricity - were continuing to "put substantial
upwards pressure" on inflation in the near term.
Further
more, increases in inflation in the short term were likely
to raise wage and price expectations - feeding back to
create an "upside risk to inflation over the medium
term."
The
MPC's February decisions will in part be influenced by
the Bank's February Inflation Report - due for publication
early in the month.
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