The Bank of England maintained its benchmark interest rate today
at 5.5 per cent, in a move that signalled its wariness towards the
risk of inflation.
According to a Bloomberg poll of 50 economists, 40 had expected
today’s move by the Bank’s Monetary Policy Committee, which had cut
the official rate by 25 basis points on December 6. The Bank has
not made successive cuts in interest rates since 2001.
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With oil prices having touched US$100 per barrel recently,
upward pressure on wages and rising food costs, the Bank was not in
a position to take any risks with inflation, said Edward Menashy,
chief economist at stockbroker, Charles Stanley.
“Inflation is like toothpaste, once it has escaped the tube it
is very difficult to put back in. Hence the MPC is trading
carefully,” Menashy said in a statement. “Nevertheless by the end
of 2008 markets could be anticipating a further 75 basis point
reduction in rates lowering base rates to 4.75%.”
The MPC will next meet on February 6. Economists widely expect a
cut then. Minutes of the last meeting will be published on January
23.
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