Bank of England keeps interest rates on hold
The Bank of England’s Monetary Policy Committee voted 9-0 today to keep interest rates on hold, citing August's benign inflation report.
The Bank of England's Monetary Policy Committee voted 9-0 today to keep interest rates on hold.
The MPC cited August's inflation report, which showed the consumer price index had fallen back to below the Government's 2% target. It stated that consumer spending showed tentative signs' of slowing, whilst pay pressures remained muted', although the committee did point to indications of elevated pricing pressures (for more on rising prices, read: Why now is a good time to invest in food).
Although the Bank acknowledged recent disruption in world markets, it stressed that its mandate is to meet the Government's 2% CPI target and that it had discussed money market turmoil only in terms of how it related to economic growth and inflation.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The Bank added: "It is too soon to tell how far the disruption in financial markets will impair the availability of credit to companies and households."
Until the beginning of August, most pundits were agreed that rates would hit 6% this year, but the credit crunch had made this appear less likely. As the subprime crisis unfolds, banks have become increasingly reluctant to lend to one another, pushing money market rates to their highest levels since 1998.
The Bank yesterday took its first steps to lower inter-bank lending rates, although it added that investors should expect no further action to boost liquidity (see: Banks take another battering).
However, the British Chamber of Commerce called for firm reassurances that further hikes were off the agenda' for the time being.
The minutes of today's meeting will be published on Wednesday 19th September.
-
FTSE 100 hits record highs – why is it rising and will we see more gains?
Advice UK equities have been described as unloved for a long time but as the FTSE 100 hits new highs, we explain if now is the time to buy British.
By Marc Shoffman Published
-
How to invest in copper
It may be time to invest in copper as the red metal appears poised for a big jump. Dominic Frisby looks at what should investors should buy
By Dominic Frisby Published