News that banks are looking to further tighten their lending criteria and the ever reducing number of new mortgage approvals raises hopes that the Bank of England will cut interest rates. (more…)

As expected, the Bank of England’s Monetary Policy Committee have kept interest rates on hold at 5%. With inflation at 3.3% against a target of 2% this was the only decision the MPC were likely to take, despite incresing economic concerns and fears that the UK could be entering a recession. If there are further signs of a downturn, the Bank must be prepared to act quickly and cut rates.

The Bank of England’s Monetary Policy Committee (MPC) voted 7 - 2 in favour of interest rates remaining on hold at 5.25%., citing the need to focus on inflation as the reason for the decision. The two dissenting voters wanted a quarter point cut to follow the 0.25% cut in February.

The news that there was mixed views in the committee, together with the aggresive 0.75% cut in the US could pave the way for a cut in April, a month sooner than many commentators had originally suggested.

The Bank of England’s Monetary Policy Committee (MPC) voted in favour of the 0.25% rate cut in February by 8-1. The majority vote supports the view that the Bank deems the credit crunch and slowing housing market to carry greater weight than the inflationary pressures caused by higher food and fuel prices.

Commentators believed that the prospect of future rate cuts were diminishing but this latest report and level of majority suggests that a further two or three 0.25% cuts in the near future could be possible.

The Bank of Englande governor Mervyn King said that the bank faced a “difficult balancing act” and it was “the outlook for inflation, in the medium term” that the central bank’s Monetary Policy Committee (MPC) would remain focused on.

Despite the economic slowdown, falling house prices and mortgage approvals, inflation could reach 3% this year. This means the Bank will not be in a rush to cut interest rates, nor will they go as far as the market hopes. Some analysts still believe that rates could drop to 4.5% by the end of the year but this latest announcement by the Bank would suggest otherwise.