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UK Interest Rate: 5.25%
UK
Interest Rates Forecast: Cut to 5% possible in April or
May
MPC
Minutes Reveal Deputy Governor Voted For Cut
When
the Bank of England Monetary Policy Committee (MPC) met
at the beginning of March, they voted 7-2 to maintain
the base interest rate at its current level of 5.25%.
That much we already knew.
What
we didn't know was the identity of the two MPC members
who voted for a cut. One was certain to be David Blanchflower,
known for his dovish tendencies, but the identity of the
second was less obvious.
This
week, the minutes of that meeting of the MPC were published,
revealing the votes cast by each member of the committee.
The second member to vote for a cut in rates was Sir John
Gieve, the Deputy Governor of the Bank.
This
is a surprise move for Gieve. Global Insight economist
Howard Archer, speaking to The Independent, suggests that
the likely explanation may be "a consequence of his
responsibility for financial stability at the Bank of
England, and the particular threat to growth coming from
tight credit conditions".
Whatever
the explanation, most analysts think that Gieve's change
of heart increases the chance of a rate cut in April -
although May is still seen as more likely by some.
The
MPC minutes also showed that the MPC believe that "output
and CPI inflation were evolving broadly in line with the
central projection in the February Inflation Report".
This supports the expectation of the markets that there
will be one further 0.25% cut sometime in the second quarter
of this year, as per the Bank's own forecast.
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