The Bank of England voted 8-1 to keep rates on hold at 5.00% during its last monetary policy meeting. Perennial Dove David Blanchflower was the only member to call for a rate cut, stating that the growing risk of slowing growth outweighed inflation risks. However, the majority saw no case for a rate cut, due to the risk of rising wage demands as a secondary effect of rising prices.
The Bank of England voted 8-1 to keep rates on hold at 5.00% during its last monetary policy meeting. Perennial Dove David Blanchflower was the only member to call for a rate cut, stating that the growing risk of slowing growth outweighed inflation risks. However, the majority saw no case for a rate cut, due to the risk of rising wage demands as a secondary effect of rising prices. Inflation in the U.K. rose to 3.3% in May from 3.0% the month prior. It was the highest level since at least 1997 when records began. BoE Governor King was required to write a letter of explanation to Chancellor Darling as to why prices have surpassed the 2% target by more than 1% and what course of action will be undertaken to attempt to reverse its course. The only previous letter was written in April 1997. In his letter he wrote that he expects that inflation will rise above the 4% mark and that the path for interest rates to meet the 2% target was uncertain. The Chancellor and Governor will be speaking today at the Mansion to address the letter and further actions. Darling in an earlier radio interview recognized that the economy was slowing but it would be “disastrous” if the UK “allowed inflation to take hold”. –[I] John Rivera, Currency Analyst[/I]