--- by Victoria Main ---
LONDON (AFX) - The Bank of England may now wait until next month's meeting of its monetary policy committee before cutting interest rates, economists said.
They took the BoE's announcement this morning that its normal money market operation will be conducted at a repo rate of 5.00 pct as a sign that for the moment it will not join the world's main central banks in easing monetary policy.
The US Federal Reserve yesterday led a round of concerted 50 basis point cuts in a bid to limit the economic impact of last week's devastating terrorist attacks against the US.
Economists were expecting the BoE to follow suit this morning in spite of governor Eddie George's comment last week that coordinated action was unlikely.
"Following this morning's operation, we now think the Bank will keep rates on hold for the moment and that will move at the next meeting of the MPC," Credit Suisse First Boston economist Robert Jukes said.
"Having missed the opportunity yesterday and again this morning, it looks highly unlikely that they will make an intermeeting move," he said.
Investec chief economist Philip Shaw expressed surprise that the BoE has not announced a cut.
Shaw said that if George planned to convene an emergency meeting of the rate-setting MPC, he could have done so by now.
The BoE's failure to act reflected the contrast between the relatively robust state of the UK economy and the global action that other monetary authorities deem necessary, he said.
"The BoE clearly believes there is no need to press the panic button," he said.
Economists said this morning's UK figures showing a rise in headline inflation to 2.6 pct in August, breaking above the BoE's target of 2.5 pct for the first time since March 1999, were not conducive to a rate cut.
Deutsche Bank economist Ciaran Barr said, "Speculation will focus on this increase as the reason the MPC has not cut rates in line with other central banks. Opportunity lost?" Jukes at CSFB agreed that inflation may have been a factor in deterring the BoE from cutting rates. He predicted that if it makes a move on Oct 4 at the conclusion of the MPC's next meeting, the reduction may only be by 25 basis points, rather than the 50 basis point cut which was expected today. A BoE spokeswoman would not say whether the bank will make another statement today.