Best of the Week
Most Popular
1.How U.S. Dollar Destruction Threatens the Global Economy - Steve Forbes
2.Why UK House Prices Will Continue Rising - 'It's Immigration Stupid' - Nadeem_Walayat
3. Bitcoin Price at Beginning of a Move up? - Mike_McAra
4.Gold Price to Plunge, Visiting Fort Knox - David_Hague
5.Silver Price Forecast - Metal to Gain Ground in August on These Factors - Jim Bach
6.Gold And Silver Will Rise With US Dollar Demise, Just Not Soon - Michael_Noonan
7.Bitcoin Price Strong Move Possible - Mike_McAra
8.Israel Gaza War Crimes - Soldier's Ordered to Shoot Civilians Including Children - C4News - C4News
9.UK House Prices Crash Warning - Daily Mail Cognitive Dissonance - Nadeem_Walayat
10.UK House Prices Boom - Top Quick Cheap Tips to Help Sell Your Home - Nadeem_Walayat
Last 5 days
Gold Big Picture: Most Important - 22nd Aug 14
How the “Uncertainty Factor” Drives Crude Oil Prices - 22nd Aug 14
Inflation, Interest Rates, and Why You Should Own Gold - 22nd Aug 14
U.S. Interest Rates Can Rise States Fed President - 22nd Aug 14
Why Emotional Discipline is Key to Trading Success - 21st Aug 14
Getting the Most Value from Your “Geriatric Cruiser” - 21st Aug 14
Mafia Boss Claims Stocks A Bubble, Buy Physical Gold and Silver - 21st Aug 14
Outrage! On The Beheading of Our Media Brother James Foley - 21st Aug 14
Stock Market Crash a Historical Pattern? - 21st Aug 14
The Black Box Economy - 21st Aug 14
The Bond Market is taking Advantage of Janet Yellen`s Dovishness - 21st Aug 14
Meet Your Investment Manager - 21st Aug 14
Gold and Silver Trading Alert as U.S. Dollar Soars to New Highs - 21st Aug 14
President Obama Strongest Statement Yet on Israel Gaza War - 20th Aug 14
Peak Gold? Russia To Surpass Australia As World No 2 Gold Producer - 20th Aug 14
AI, Robotics, and the Future of Jobs - 20th Aug 14
Stock Market Investors What's Your Exit? - 20th Aug 14
The Gold War - Thinker, Trader, Holder, Why? - 20th Aug 14
Ukraine Interest Rates Soars to 17.5% As External Debt Cannot be Repaid - 20th Aug 14
Rising Interest Rates and The End of Stimuland - 20th Aug 14
Inflation Watch: $245,000 to Raise a Child in United States - 20th Aug 14
Inside the Stunning Deal That Put Apple and IBM on the Same Side - 20th Aug 14
The US Gold in Fort Knox is Secure, Gone, or Irrelevant? - 19th Aug 14
Bitcoin Price On The Brink of a Possible Reversal - 19th Aug 14
Why Tesla Stock Price Will Double in the Next 12 Months - 19th Aug 14
Europe's Economic Malaise: The New Normal? - 19th Aug 14
The Coming U.S. Economic Collapse Will Trigger a Revolution - 19th Aug 14
Market Bubbles, Bubbles Everywhere - 19th Aug 14
This is Your Economic Recovery With and Without Drugs - 19th Aug 14
Stock Market Strong Start to Jackson Hole Week - 19th Aug 14
Iraq, Ukraine - Oh, What A Tangled Mess We Weave - 19th Aug 14
How to Apply Moving Averages as a Trading Tool - Video - 18th Aug 14
Why Short Stock Traders Are Losing Money This Week - 18th Aug 14
Stock Market Rally May be Complete - 18th Aug 14
Why Chinese Citizens Invest In Gold - 18th Aug 14
Palladium Reaches 13-Year High Over $900 oz as Gold Trading Volumes Surge 66% - 18th Aug 14
Understand and Profit from Surging European Volatility - 18th Aug 14
No Escape from The Dollar as The Currency Standard - 18th Aug 14
Stock Market New Highs Less Certain - 18th Aug 14
German Stock Market DAX About To Drop - 18th Aug 14
Stay on Board - Stock Market Big Picture - 18th Aug 14
Europe Economy Is Tanking, QE Is Coming - 18th Aug 14
Are You Ready for The Greatest Technology Revolution Yet? - 17th Aug 14
Why King Coal is Bigger than Oil or Gas - 17th Aug 14
U.S. Empire of Death and Lies - 17th Aug 14
Ukraine - Whose Spin Are We Caught Up In Here? - 17th Aug 14
Time Decay And No Escape For Abenomics - 17th Aug 14
India BSE SENSEX The Party Is Over In Bombay - 17th Aug 14
Stock Market Uptrend Looks Underway - 17th Aug 14
The Key Role Of Conspiracy Theory In Dumbing Down Society - 17th Aug 14
The Federal Reserve in Denial Mode - Bond Market Explained - 17th Aug 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

BOE Keeps UK Interest Rates on Hold in April But likely to Rise in May

Interest-Rates / UK Interest Rates Apr 05, 2007 - 08:39 PM GMT

By: Victoria_Marklew

Interest-Rates As expected, the Bank of England's (BoE) Monetary Policy Committee (MPC) left its policy repo rate unchanged at 5.25% this morning. However, as we've noted before (see Daily Global Commentary, March 21: UK: Rate Hike Expectations Ease but Don't Rule Out Further Tightening ), the BoE concluded in its February Inflation Report that inflation would be slightly above the 2.0% target in two years' time if the repo rate stayed at 5.25%. Given the members' concerns about underlying inflation pressures and about an increase in firms' pricing power, recent data suggest the odds still favor another rate hike in May.


Despite three rate hikes since August, the housing market remains pretty robust, although BoE Governor King noted last week that there are signs the market is starting to slow. The BoE's latest report on consumer borrowing found that mortgage lending picked up again in February, rising to £10.3 billion from £9.5 billion in January, while the number of mortgage approvals for the month remained steady at 119,000. Last week the Nationwide mortgage lender said that house price inflation was starting to slow, with average prices in March up 9.3% on the year vs. 10.2% in February.

However today the largest lender, HBOS Plc, released its Halifax house price survey, showing the annual three-month rate of price increases rising to a two-year high of 11.1%. The market may be on the verge of easing, but there's still plenty of near-term life left.

Unsecured consumer credit data are unequivocal, though. Last week's BoE survey reported a lessthan- expected rise in credit, up just £919 million in the month, the smallest increase since September, and down from £1.02 billion in January and £1.5 billion a year earlier. Those rate hikes are starting to curb consumer borrowing.

And the rest of the economy? Again, the data are somewhat mixed. The CIPS/RBS service sector index, released yesterday, will be a source of ammunition to MPC hawks. The PMI nudged upward to a reading of 57.6 in March from 57.4 in February and the measure of prices charged by companies also picked up, coming in at 55.3 - up from 54.2 in February, and the highest reading since last August. The survey also noted "anecdotal evidence" that the latest round of inflation was leading to increased wage bills. On the other hand, the survey noted that employment growth eased to its lowest since August and outstanding business declined for the first time since November 2005.

Just before the MPC announcement this morning came the news that factory output fell for the second month running in February and at its sharpest rate in nearly two-and-a-half years, raising doubts about the traction of manufacturing's recent recovery. Manufacturing output fell 0.6% on the month and rose 1.2% on the year, while overall industrial production was down 0.2% from January and up just 0.3% on the year.

Earlier this week came the news that the CIPS/RBS manufacturing PMI slipped from 55.4 in February to 54.4 in March. However, the survey's new orders index, while down from the twoand- a-half year reading of 57.6 in February, remained at a relatively high level of 57.1. And, export orders rose at their fastest pace since January 2004, with the index edging up to 55.8 (55.7 in February), boosted in particular by demand from the Euro-zone. All of this suggests that the output report for March may look a little more sanguine.

All told, it is likely that the MPC remains divided over the direction of policy. Just how divided will become clear when the minutes of today's meeting are published on April 18. For now, we continue to favor a rate hike at the May 10 meeting, but much will depend on the conclusions of the BoE's May Inflation Report - not due for publication until May 16, but the MPC members will see a preliminary copy. Until then, key data to watch include March CPI on April 17; February average earnings and February-March labor market reports on April 18; and March retail sales on April 20.

By Victoria Marklew
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Victoria Marklew is Vice President and International Economist at The Northern Trust Company, Chicago. She joined the Bank in 1991, and works in the Economic Research Department, where she assesses country lending and investment risk, focusing in particular on Asia. Ms. Marklew has a B.A. degree from the University of London, an M.Sc. from the London School of Economics, and a Ph.D. in Political Economy from the University of Pennsylvania. She is the author of Cash, Crisis, and Corporate Governance: The Role of National Financial Systems in Industrial Restructuring (University of Michigan Press, 1995).

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014