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BoE keeps key Bank Rate on hold at 5.00 percent

Thu, May 8 2008, 11:15 GMT
http://www.afxnews.com

LONDON (Thomson Financial) - The Bank of England has kept its benchmark Bank Rate unchanged at 5.00 percent today despite a run of soft data in the run-up to today's meeting of the Monetary Policy Committee.

The decision was expected. All but one of the 36 economists polled by Thomson Financial News last week thought the MPC would keep rates on hold.

However, Tuesday's weak PMI service sector survey, coupled with woeful consumer confidence and industrial production figures on Wednesday, had raised expectations that the nine-member MPC may cut borrowing costs a quarter point for the second month running.

Minutes to the meeting will be published on Wednesday, May 21.

Ahead of that, the BoE will publish its Inflation Report on Wednesday.

Though that is likely to show that the UK economy's economic growth prospects have deteriorated since February's assessment, near-term inflationary pressures are likely to have intensified.

As Charlie Bean, the BoE's chief economist said in a speech recently, the central bank is "walking a tightrope".

The rate setters will have had the flash estimate for April's rate of inflation during their deliberations, and the fact they opted for no change may reinforce speculation that the annual CPI rate is rising.

Most Bank watchers think the governor Mervyn King will have to write his second letter to the Chancellor explaining why inflation has risen by more than a percentage point above the 2.0 percent target.

pan.pylas@thomsonreuters.com

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