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Unanimous vote to keep interest rates on hold

According to the minutes recently released from the August Monetary Policy Committee meeting the decision to keep interest rates on hold earlier this month was a unanimous one. Interest rates following the August meeting were kept at 5.75% even though many analysts and economists had been predicting that it would rise to 6% with a further 0.25% rise. Interest rates have risen by 1.25% in the past year, with a series of five interest rate rises of 0.25% each.

The minutes from the latest Monetary Policy Committee meeting also stated that members had 'no firm view' with regards to whether interest rates would need to rise again in order to try and bring inflation under control. In March inflation stood at 3.1%, which was way above the government target of 2%. This feel to 2.4% by June, and according to the latest figures this has now dropped within the government target in July, coming in at 1.9%.

Inflation has not been within the government target since March 2006, and therefore this sharp drop has given many people hope that no further interest rate rises will be needed, as the Bank of England had been applying these to try and bring inflation back within target. However, the Monetary Policy Committee stated that the shorter term outlook with regards to inflation "was still clouded with uncertainty, particularly about the path of household goods, food and utility prices".

With regards to the latest vote to keep interest rates on hold on analyst stated: "Very much as we expected, 9-0 is the first unanimous vote since May. The key quote is that most had no firm view on whether rates would need to rise. We remain of the view that the MPC is in wait-and-see mode."

Tom Smith
22nd August 2007

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