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January 10, 2008

Base rate unchanged at 5.5%

by Gill Montia

Story link: Base rate unchanged at 5.5%

The Bank of England’s Monetary Policy Committee (MPC) has voted to keep the base rate unchanged in January, at 5.5%.

The rate was last cut in December, by 0.25%, and this month, policymakers were faced with the task of balancing recent signs of a slowdown in consumer spending against growing inflationary pressures, such as higher energy and food bills.

Oil prices remain at record highs and Npower, the electricity and gas supplier, increased prices substantially last week. Its competitors are expected to follow suit.

According to Trevor Williams of Lloyds TSB Corporate Markets, the MPC “clearly wanted to wait until February’s quarterly inflation report, which brings all of these factors together, for reassurance that the time is right to cut interest rates again.”

David Kern, economic adviser to The British Chambers of Commerce, had hoped for a modest interest rate cut, which “would have alleviated the threats to the banking system and would have helped restore the smooth flow of credit in the economy”.

Analysts now expect the MPC to cut interest rates in February, and some are predicting that this could be by half a percentage point.

 

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