By BridgeNews
London--Jan. 11--The Bank of England's Monetary Policy Committee on Thursday left its key U.K. lending rate unchanged at 6.00%. The decision had been widely expected, with 22 out of 23 economists surveyed by BridgeNews expecting rates to be left on hold, despite mounting worries about the health of the world economy. Rates have now been unchanged for 11 months, the longest period of interest rate stability since the turn of the last decade.
* * * The MPC did not comment on its decision, leaving observers to wait until the publication of the minutes on Jan. 24. In December, two members of the committee voted for a rate cut and seven to leave rates unchanged. The expectation is that the split was similar this month.
The most important news since the December meeting was the U.S. Federal Reserve's decision to cut its rates by 50 basis points to 6.0%, which intensified concerns about the state of the U.S. economy.
But the general view about the U.K. economy, and to a certain extent the European, is that they are in a better state and not suffering from the same imbalances that look likely to produce a sharp slowdown in the U.S.
The U.K. data over the last month has been mixed. There have been conflicting signals about the strength of consumer activity over the critical Christmas period, with some retailers reporting good sales and other complaining about softer demand.
Similarly, lending figures have been strong but some measures of the house price inflation suggest the market is drifting lower.
The lack of clarity in the outlook is demonstrated by the divisions among economists about medium-term rate prospects. Most are expecting a cut in the first half of the year but a handful still think the strength of the consumer sector will force the MPC to raise rates before the end of the year. The average rate forecast for the end of the year is 5.5% but some economists predict they will be at 6.5%.
Business groups were also split about the best outcome from this latest MPC meeting. The Confederation of British Industry and British Chambers of Commerce both urged the MPC to cut but the Institute of Directors and the Engineering Employers Federation said it wasn't necessary.