BoE likely to hold interest rates

Mon, 05 Jun 2006

The Bank of England (BoE) is widely expected to announce that it will keep interest rates at 4.5 per cent.

Personal loans, banking and tracker mortgages, which are affected by the Bank of England base rate, will be unchanged for the tenth consecutive month if the experts are correct.

Reuters polled 40 analysts, all of which stated that they expected the bank's monetary policy committee not to alter the rates at the meeting to be held around noon on Thursday.

The monetary policy committee was split three ways in last month's meeting, with one member suggesting a quarter point rise, while Stephen Nickell called for a cut.

Factors likely to affect the decision are inflation, the mortgage market, labour market and the International economy.

John Butler, economist at HSBC, commented "Interest rates are likely to remain at 4.5 per cent for the tenth consecutive month.

"Since the Inflation Report, the key developments have been a sharp drop in equity prices and a three per cent rise in trade-weighted sterling.

"Both moves should dampen the committee's fear of inflation and hence, keep the monetary policy committee on hold," he told the Western Mail.

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