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Bank of England to put interest rates on ice
The Bank of England is set to freeze interest rates for another month when it announces its decision tomorrow, experts predict.
For the last eight months the Bank's interest rate setting Monetary Policy Committee (MPC) has left base rate unchanged at 4.5 per cent, and there are few signs that it will change its ways after Thursday's meeting.
Just one of the 120 economists polled by the Reuters, Bloomberg, and AFX news agencies predicted any result other than a hold - with Nationwide saying that there is a 90 per cent chance that interest rates would stay on hold tomorrow.
"Latest data has made unchanged interest rates even more of a nailed-on certainty this Thursday. Indeed, it is currently odds-on that the Monetary Policy Committee will sit on its hands for many more months to come," said Howard Archer, chief economist at the Global Insight consultancy.
The Bank of England raises and lowers the cost of borrowing in the UK, which affects millions of mortgage-holders and savers, in an attempt to keep inflation at the government's target of two per cent.
Since it last trimmed rates in August last year, no more than one member of the nine-strong MPC has voted for rates to change, with economist Stephen Nickell consistently calling for a 0.25 per cent cut.
However, this month is Mr Nickell's last as an MPC member after 72 months as part of the Bank's policy unit.
And with the lone dissenting voice set to leave, economists believe interest rates are set to stay at their current level of 4.5 per cent for months to come.
"Interest rates may stay unchanged through to the second half of 2007," said Global Insight's Mr Archer.
To take advantage of current interest rate stability by switching to a new mortgage, check out Finance Choices' mortgage comparison tables.
For the last eight months the Bank's interest rate setting Monetary Policy Committee (MPC) has left base rate unchanged at 4.5 per cent, and there are few signs that it will change its ways after Thursday's meeting.
Just one of the 120 economists polled by the Reuters, Bloomberg, and AFX news agencies predicted any result other than a hold - with Nationwide saying that there is a 90 per cent chance that interest rates would stay on hold tomorrow.
"Latest data has made unchanged interest rates even more of a nailed-on certainty this Thursday. Indeed, it is currently odds-on that the Monetary Policy Committee will sit on its hands for many more months to come," said Howard Archer, chief economist at the Global Insight consultancy.
The Bank of England raises and lowers the cost of borrowing in the UK, which affects millions of mortgage-holders and savers, in an attempt to keep inflation at the government's target of two per cent.
Since it last trimmed rates in August last year, no more than one member of the nine-strong MPC has voted for rates to change, with economist Stephen Nickell consistently calling for a 0.25 per cent cut.
However, this month is Mr Nickell's last as an MPC member after 72 months as part of the Bank's policy unit.
And with the lone dissenting voice set to leave, economists believe interest rates are set to stay at their current level of 4.5 per cent for months to come.
"Interest rates may stay unchanged through to the second half of 2007," said Global Insight's Mr Archer.
To take advantage of current interest rate stability by switching to a new mortgage, check out Finance Choices' mortgage comparison tables.
posted by Bruce Wayne at 6:44 AM
Bank of England to put interest rates on ice
6 Comments:
The BBC usually predict these rate changes in advance but nothing thus far from the Beeb. Wonder why?
Nobody expects the Bank of England to raise interest rates when the Monetary Policy Committee concludes its two-day monthly meeting tomorrow, but it can at least now safely be said that the contrary prospect of a cut has faded into the indefinite future. As things stand, it is much more likely the next move will be up, quite possibly as soon as only months away.
The view that we in Britain could have falling interest rates at a time when virtually everyone else is raising theirs always did to me seem a little suspect. The only way of rationalising such a perspective is on the basis that we were a lot further forward in the cycle than everyone else. Yet, perhaps regrettably, the time when domestic economies could forge along, ploughing their own distinctive furrow regardless of what was happening elsewhere, is long since gone.
Today, we are more a part of the global economy than ever before, and almost everywhere else in the world, from Europe to Japan and China, interest rates are rising. Even in the US, which has experienced a consumer and housing boom of proportionately equal duration and magnitude, rates may not be as close to the top of the cycle as previously believed.
So far as Britain is concerned, most of the recent data has pointed to stronger growth. More worrying from the Bank of England's perspective, inflationary expectations are also rising. The pound doesn't look as robust as it was and energy prices are still off the scale. The MPC will continue to fence sit this week -- indeed, as several of its members have already complained, there scarcely seems any point in it meeting at all as things stand -- but the hawkish tendency will very definitely be in the ascendant once more.
Ok, I'll make my prediction.
A 0.25 rate rise by early Sept 2006, latest.
Housing market dies Oct 2006.
Mervyn may want to show the world that he is not under Gordon's control and raise the rates as a pre-emptive strike against real inflation in the economy (not CPI shoemenders).
The amazing thing to me is that all these people have been walking around in a daze. We have been saying IR will rise whilst all the newspapers have been telling everyone to wait for a cut.
So why?????? The signs were the same to them as they are to us. They fail to see the signs because they don't want to see them.
It's the same with houses prices. They want them to rise, even congratulate everyone when they do. But all those detatched from hype can see the signs and the signs say they will fall.
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