Bank expected to hold fire on rates
The Bank will announce its decision tomorrow
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Wednesday, 04, Apr 2007 12:05
Interest rates are predicted to be held at their current 5.25 per cent level in tomorrow's Bank of England decision.
The Bank's monetary policy committee (MPC) is meeting today to vote on whether to raise, lower or hold rates, but economic data indicates that a third successive hold will be recorded.
David Blanchflower was the only MPC member to advocate a reduction in rates last month, with his 11 colleagues supporting a no change decision.
The Bank has held rates at 5.25 per cent since its shock quarter of a percentage rise in January, claiming that the impact of the increase was still filtering through the economy.
In the ensuing three months retail figures and manufacturing output have both improved, while the Bank itself is confident of meeting chancellor Gordon Brown's two per cent consumer price index (CPI) inflation target this year.
But the latest housing market report from Nationwide reveals that annual inflation rose to 9.5 per cent in the last quarter, with property values in Northern Ireland increasing at an unprecedented rate.
And releasing its monthly consumer confidence index today - although the building society said that Britons were "slightly more upbeat" than in March - its chief economist Fionnuala Earley insisted the overall situation was still "subdued".
"With uncertainty about the interest rate position, but with the risk clearly on the upside, consumers are unlikely to recover confidence in the short term," she said.
Howard Archer of research firm Global Insight similarly says that there is a "real chance" the MPC will signal a 0.25 percentage point rise tomorrow.
He added however that he lent "towards the view that the MPC will hold fire for one more month and then deliver the coup de grace in May".