Rate Held by Bank of England over Lingering Inflation Fears; ECONOMICS
Lingering inflation concerns prompted Bank of England policymakers to hold base rate at 5.75 per cent in November.
The Bank's nine-member Monetary Policy Committee voted 7-2 in favour of no change two weeks ago amid worries over soaring oil and food costs and firmer-than-expected growth, the minutes of the meeting, published yesterday showed.
The MPC said it would "wait and see" to assess the extent of any economic slowdown and said the effects of the recent financial market turmoil on households and businesses "were so far limited".
The Bank's latest inflation report, published last week, signalled at least two interest rate reductions to come for homeowners next year.
Some analysts have predicted a cut as soon as next month.
Despite signs of a cooling housing market and slowing business activity, the majority of the MPC's members were afraid of cutting rates too soon and adding to inflation fears.
"There were risks attached to a pre-emptive cut if the slowdown in activity was more muted, and the rise in inflation in the early part of the forecast period was sharper than expected," the minutes stated.
"If inflation expectations and wage growth picked up as a result, then the necessary policy tightening could prove costly."
ING economist James Knightley said: "We suspect that the Bank will want firmer evidence that the economy is slowing.
"Moreover, with inflation being pushed higher by food and energy costs - possibly back up to 2.5 per cent in the next couple of months - the uncertainty factor may keep the MPC on hold for a couple of months."
In October, the members voted 8-1 in favour of a hold but this month the Bank's deputy governor for financial stability, Sir John Gieve, a noted "hawk", switched sides to join David Blanchflower, a rates "dove", in calling for a cut. …