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Interest rates held at 4.5%

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10/02/2006

The Bank of England has voted to maintain interest rates at 4.5%.

 The decision to hold rates was widely expected in the City, with speculation now growing over whether the next rate cut will come in March or May.

Analysts believe the minutes of the meeting to be published in two weeks will show signs of growing divisions inside the nine-strong Monetary Policy Committee (MPC) of economists at the Bank.

Next week’s Quarterly Inflation report will have a great influence on any potential Base Rate move.

“The MPC will have had access to much of the draft Report before deciding to leave Base Rate at 4.5% and it is primarily because the next Inflation Report is due in May that the consensus view now is that Base Rate won’t be cut until then,” observes Ray Boulger of broker John Charcol.

“However, the jury is out on the timing of the next cut and whether it is in March or the second quarter will depend primarily on next month’s statistics and any further signs of a weakening economy.”

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