Like the European Central Bank, the Bank of England will also be delivering a monetary policy decision next week and they are expected to leave interest rates unchanged.
The difference for the BoE is that inflationary pressures in the UK are slightly better while economic conditions are slightly worse. This morning’s HBOS house prices and construction sector PMI report both fell short of expectations. This explains why Prime Minister Gordon Brown suffered a humiliating defeat at the polls on Thursday night. Everyone is looking for the Bank of England to do more, but it remains to be seen whether they will actually deliver. The BoE has surprised the markets in many instances which means that cutting rates when the markets doesn’t expect them to would not be out of character. However judging from the minutes of the last monetary policy meeting, there may not be many supporters for a rate cut. The MPC voted 6-2-1 for the quarter point cut in April with 6 members supporting the move, 2 members voting for rates to be left unchanged and 1 member voting for a 50bp rate cut.