LONDON, Dec 7: Bank of England policymakers were to kick off two-day rate-setting talks later Wednesday, with analysts predicting “no change” from 4.50 per cent for the fourth month in a row.
Thursday’s interest rate decision by the Bank of England is one of the easiest ever to call, with unchanged monetary policy being a stone-dead certainty, said Global Insight economist Howard Archer.
All 30 forecasters polled by AFP’s financial newswire AFX News said they expected frozen rates for the next couple of months as they monitor the labour market and inflation more closely.
The central bank’s nine-strong Monetary Policy Committee voted by a unanimous 9-0 to keep the cost of borrowing in Britain at 4.50 per cent, minutes from November’s two-day meeting showed.
Policymakers had voted unanimously also in September and October to keep the “repo” rate — the rate of interest at which the BoE lends to commercial banks — on hold.
Rates were cut in August by a quarter-point to the current level amid growing inflation in Britain.
The BoE is firmly in wait-and-see mode for now, given the particularly high uncertainties and risks currently surrounding both the growth and the inflation outlooks, Archer said.
Consumer spending over the critical Christmas and New Year trading period would be crucial in the months ahead, he added.
This week, British finance minister Gordon Brown slashed his 2005 growth forecast for the economy to 1.75 per cent, around half of the previous target of 3.0-3.5 per cent, citing inflationary pressures amid high oil costs.
We are on course to meet our inflation target not just this year, but next year, and the year after that, Chancellor of the Exchequer Brown added in his pre-budget report, a curtain-raiser for the March 2006 budget.
The BoE’s main task is to keep 12-month inflation close to 2.0-per cent — a target chosen by the Labour government. However in October, annual inflation stood at 2.3 per cent.
In last month’s quarterly Inflation Report, the BoE predicted that inflation would be close to target the next two years or so, but the forecast assumed there were no effects on wage levels from rising oil prices.
Investec analyst Philip Shaw added: The committee is quite correct to keep policy frozen for now, given uncertainty over growth trends and the January private sector wage round.
In the November minutes, the BoE did not discuss the need for a rate cut, partly because of concerns over the inflation impact of wage growth in the British economy. —AFP
