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Bank voted 7-2 to hold UK rates | Bank voted 7-2 to hold UK rates |
(about 1 hour later) | |
Policymakers at the Bank of England voted 7-2 to keep UK interest rates at 5.75% earlier this month, minutes show. | Policymakers at the Bank of England voted 7-2 to keep UK interest rates at 5.75% earlier this month, minutes show. |
The two policymakers who did not vote to hold rates were David Blanchflower as well as deputy governor John Gieve. | The two policymakers who did not vote to hold rates were David Blanchflower as well as deputy governor John Gieve. |
The pair wanted a cut in interest rates after "continuing turmoil in financial markets" and the ongoing credit crunch. | The pair wanted a cut in interest rates after "continuing turmoil in financial markets" and the ongoing credit crunch. |
But most of the Monetary Policy Committee (MPC) members said they had seen little sign of the credit crunch hitting UK consumers and firms so far. | But most of the Monetary Policy Committee (MPC) members said they had seen little sign of the credit crunch hitting UK consumers and firms so far. |
And they were still worried about inflation risks posed by rising oil and other commodity prices. | And they were still worried about inflation risks posed by rising oil and other commodity prices. |
"Moreover, since a reduction in Bank Rate was not widely expected this month, there was a danger that an immediate cut would be misinterpreted, precipitating an unwarranted further fall in the market yield curve," the minutes said. | "Moreover, since a reduction in Bank Rate was not widely expected this month, there was a danger that an immediate cut would be misinterpreted, precipitating an unwarranted further fall in the market yield curve," the minutes said. |
'Uncertainty' remains | 'Uncertainty' remains |
The last increase in UK interest rates came in July, when they rose to 5.75% from 5.5%. | The last increase in UK interest rates came in July, when they rose to 5.75% from 5.5%. |
At the time, many analysts expected rates to hit 6% by the end of the year. | At the time, many analysts expected rates to hit 6% by the end of the year. |
However, the recent credit crunch on the world's financial markets, which led to the crisis at Northern Rock, has led many economists to amend their forecasts, with some now predicting a rate cut before too long. | However, the recent credit crunch on the world's financial markets, which led to the crisis at Northern Rock, has led many economists to amend their forecasts, with some now predicting a rate cut before too long. |
In its latest economic forecast, the Bank of England itself now says that there is likely to be a "sharp slowdown" in UK growth next year. | In its latest economic forecast, the Bank of England itself now says that there is likely to be a "sharp slowdown" in UK growth next year. |
Martin Slaney of GFT Global Markets said: "The minutes do little to dispel uncertainty over the timing of when a rate cut will come." | Martin Slaney of GFT Global Markets said: "The minutes do little to dispel uncertainty over the timing of when a rate cut will come." |
He said it suggested rates "will be kept on hold for a few more months" as the Bank monitored whether the negative effects of the credit crisis on growth was outweighing inflationary concerns over food and energy prices. | He said it suggested rates "will be kept on hold for a few more months" as the Bank monitored whether the negative effects of the credit crisis on growth was outweighing inflationary concerns over food and energy prices. |
And Ian Kernohan, economist at RLAM, said the minutes raised the prospect that an interest rate cut "could come as early as next month". |
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