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One MPC member wanted to cut interest rates

The minutes from the last Monetary Policy Committee meeting, which took place at the beginning of October, has shown that one member of the committee voted to actually lower interest rates by 0.25% this month.

However, he was outvoted by 8-1 and as a result the interest rate was kept on hold for the third consecutive month. The Bank of England has raised interest rates five times since August 2006, with a series of 0.25% rises between August 2006 and July 2007. However, since July interest rates have remained on hold at 5.75%.

The Bank of England is being pressured to cut interest rates amidst fears of the effects of the credit crunch, which many state will have a slowdown effect on the economy if action is not taken. Many experts have predicted that interest rates will fall before the year is out, and some think that there will be two interest rate cuts by June of next year. The majority of MPC members voted to keep rates on hold this month, stating that November's forecasts would provide a clearer picture with regards to the state of the economy.

One economist stated: "The November Inflation Report projections are going to be of critical importance in determining whether rates do fall this year or not. Whilst the case for lower rates is not yet done and dusted, a November cut remains our central view."

The minutes from the MPC meeting in October read: "It was possible that a cut in rates this month could be misinterpreted as a signal that monetary policy was focused on supporting the financial system and not on meeting the inflation target."

House prices in the UK have also started to fall in some areas, with September figures showing that there was an unexpected fall in house prices, which many predict will continue over the coming months.

Tom Smith
26th October 2007

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