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The Interest Rate Hawks Are Out In Force

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BoE looks set to hold rates, cut expectations wane

Tue Mar 7, 2006 4:19 PM GMT

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By Sumeet Desai

LONDON, March 7 (Reuters) - British interest rates will almost certainly stay at 4.5 percent this week and economists are no longer so sure the Bank of England will cut borrowing costs again in the next few months.

All 40 analysts polled by Reuters last week predicted the central bank's Monetary Policy Committee would keep rates steady for the seventh month this Thursday. Many said slow economic growth will prompt another cut as soon as May.

But more news showing the economy picking up speed and house prices once again rising has got people thinking that the next rate move may well be up, even if not for some time.

"We do not think there will be much serious debate over the outcome of this month's meeting," said Philip Shaw, chief economist at Investec.

"A more interesting debate surrounds whether the MPC will or should ease over the coming months. We have changed our view. We had been tentatively pencilling a further 25 basis point cut in rates during the spring. We no longer think this will be the case."

The BoE's latest forecasts certainly suggested the central bank saw no urgent need to change policy right now. It predicted growth picking up close to its long-run average and inflation sticking close to the 2.0 percent target.

ONE DOVE

MPC member Stephen Nickell, however, has cast doubt on those relatively benign forecasts and voted unsuccessfully for a rate cut three months running.

But so far there has been little sign that any of the other eight MPC members are ready to join his cause. Even fellow dove Kate Barker appeared relatively satisfied with the BoE's central forecast of economic growth picking up toward 3 percent.

"The already long odds that any other MPC members could join Stephen Nickell in voting for a rate cut will have been stretched even further by the very strong purchasing managers' service sector survey for February," said Howard Archer of Global Insight.

http://today.reuters.co.uk/investing/finan...RITAIN-BANK.XML

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ONE DOVE

MPC member Stephen Nickell, however, has cast doubt on those relatively benign forecasts and voted unsuccessfully for a rate cut three months running.

But so far there has been little sign that any of the other eight MPC members are ready to join his cause. Even fellow dove Kate Barker appeared relatively satisfied with the BoE's central forecast of economic growth picking up toward 3 percent.

"The already long odds that any other MPC members could join Stephen Nickell in voting for a rate cut will have been stretched even further by the very strong purchasing managers' service sector survey for February," said Howard Archer of Global Insight.

And nickell quits in may...

Edited by RobertPaulson

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But more news showing the economy picking up speed and house prices once again rising has got people thinking that the next rate move may well be up, even if not for some time.

That's great! Rightmove and alike have shot themselves in the foot with their ever optimistic surveys.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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