Eight of the nine Monetary Policy Committee members voted to maintain interest rates at 4.5%, with S...
Eight of the nine Monetary Policy Committee members voted to maintain interest rates at 4.5%, with Stephen Nickell voting against, preferring a reduction of 25 basis points.
The minutes showed Nickell called for a cut because gross domestic product growth had decreased over the past 18 months, with the preliminary estimate for quarter four at 0.6%.
Nickell thought the central projection for consumption and investment appeared too optimistic even though it had improved in recent months. It seemed likely that inflation would fall below target once the effects of higher energy prices had dropped out of the year-on-year calculations.
Commenting on the base rate decision, Trevor Williams, chief economist at Lloyds TSB Financial Markets, said: "The MPC was unlikely to decrease rates with house price inflation set to rise further in the coming months. Strengthening retail sales, services and manufacturing and the fact that inflation remains on target at 2% will also have helped discourage a cut.
"Couple this with the fact that economic growth is rising at 2.4% a year and one can assume the MPC will not be keen to change things in the short term unless something dramatic happens over the coming months."
As interest rates in the US were raised to 4.5% in January, UK and US will continue to remain level. According to Halifax, this is the first time in five years both the Bank of England and the Fed rates have been level.
Tim Crawford, group economist at Halifax, said: "In March it seems likely that US rates will be higher than UK rates, which has not happened since 2000. From the mid-1990s until 2001, US and UK monetary policy followed a similar trend, although rates were slightly higher in the UK. Interest rates have diverged in the past few years on the back of the aggressive easing cycle in the US. Now they seem back on a similar path and a period of slightly lower British interest rates could be approaching."
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