BoE Voted 8-1 To Keep Rates Unchanged

The BoE voted 8 to 1 to keep the benchmark rate unchanged at 5.00% at their May 8th policy meeting due to inflation concerns. Perennial dove David Blanchflower was the only dissenter calling for a quarter point cut, which was expected as he had publicly made statements calling for action to stem a U.K. recession. Inflation continues to remain a concern for the central bank as they believe that current record energy costs will filter through to consumer prices for the next twelve months. Governor Meryn King stated in the quarterly inflation report that he expects to have to write a letter of explanation to Chancellor Darling for several quarters as prices continue to grow above the 3% threshold. The majority recognized the significant growth risks to the economy from the declining housing market and property values, but felt that the slowdown was needed to rein in inflation and reach their 2% CPI target. The committee believes that further cuts would risk letting inflation get out of control and send the wrong signal to wage bargainers and companies. The expectation is that the MPC may not look to change interest rates until next year.

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