Bank of England Base Rate

Whilst the decision by the Monetary Policy Committee to hold the Bank of England Base Rate at 5% was a foregone conclusion, the betting now is concentrated on whether their will be another change this year at all.

The Bank are still tied in to making inflation their number one priority, and rising oil and food prices are helping to push inflation to the 3% level, rather than the 2% level that is targeted.

There has been some pressure on the Bank to cut rates, even with the inflationary issues, by up to 0.75% over the next few months in order to help kick start the economy. Many commentators agree with The British Chambers of Commerce that the MPC should be considering the whole economic outlook and not just inflation.

The reality is that the MPC will take a wait and see approach over the next few weeks. Will inflationary pressure feed through to wage negotiations, will the housing market continue to fall and will economic growth continue to stutter ? All these questions will be taken into account before they announce their next move.

I still believe there is some room for maneuver and do not believe that the Bank always needs to be so cautious. They have so far shunned away from strong, decisive action which may be needed sooner than they think to avert a deeper and more widespread crises.

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