The BoE voted 7-1-1 to keep their benchmark rate unchanged at 5.00%, with Tim Besley calling for a rate hike and David Blanchflower a cut. The MPC stated that the path of inflation would likely be higher than forecasted and that the housing downturn has gathered momentum and the slowdown to growth was more pronounced than forecasted. The committee chose to leave the rate unchanged to send a strong message on inflation with Besley calling for the central bank to anchor inflation to ensure credibility. The perennial dove Blanchflower voted for a 10th consecutive month to cut rates. In a recent interview the committee member stated that the British economy was already in a recession and that the MPC should aggressively lower interest rates. The worst housing slump arguably since the great depression has weighed on growth and sticky credit markets are making it difficult for borrowers to get mortgages leaving a glut of inventory, leading to June mortgages approvals falling to 21,118 from 27,499 the month prior-the lowest on record since 1997. The housing downturn and banks refusing to lend has sent the manufacturing and service sectors into contraction… However, inflation rising to 3.8% in June has left the remaining members far more hawkish as they fear the secondary effects of inflation in the form of rising wages. Additionally, as long as consumer prices remain above the 3.0% threshold, Governor King will have to continue writing a letter of explanation to Chancellor Darling. The committee also stated that if a change in rates was needed that it would be more appropriate next month. - [I]John Rivera, Currency Analyst[/I]