Interest rate cut unlikely

A cut in interest rates in the near future is highly unlikely, new data from the Bank of England has revealed.

11:56 26 January 2005

A cut in interest rates in the near future is highly unlikely, new data from the Bank of England has revealed.

Following the worst Christmas high street sales performance for 23 years, and with house prices barely moving, some economists had been predicting that the Bank's interest rate-setting Monetary Policy Committee might be considering lowering the cost of borrowing.

But the minutes from the latest meeting of the committee, released today, have poured cold water on these hopes.

According to the minutes the MPC voted unanimously to keep interest rates on hold at a three-year high of 4.75 per cent.

Additionally the minutes stated that "overall, the committee agreed that there had been relatively little news this month" that would make them either raise or lower interest rates.

The MPC has voted to keep interest rates on hold since August last year, after raising the cost of borrowing five times in quick succession.

The Bank raises and lowers interest rates to try and keep inflation as close as it can to its two per cent target.

But an unexpected increase in inflation to 1.6 per cent, poor sales figures, and the stagnation of house prices did not seem to worry the MPC.

Its minutes stated: "The committee saw no clear evidence of a significant change in the pace of consumption growth relative to that expected . . . despite some initial downbeat press comments about the weakness of retail sales over the Christmas period.

"The latest house price indicators were, if anything, a little stronger than expected at the time of the [the Bank's] November Inflation Report, but it was too early to draw firm conclusions about the pace of the housing market slowdown.

"There were further signs of slower money and credit growth, which for some members slightly reduced the upside risks to inflation."