Base rate may not rise

Posted: 20 Jul 2007 16:35:47 GMT

The assumption that the base rate will rise to six per cent in the coming months is beginning to lose some weight.

The assumption that the base rate will rise to six per cent in the coming months is beginning to lose some weight.

Almost all economists were unanimous in predicting that rates would hit six per cent by the end of the year but minutes from the Bank of England's Monetary Policy Committee (MPC) meeting in July have cast doubt on this.

It was revealed that the Bank voted 6-3 in favour of increasing rates to 5.75 per cent, with analysts now predicting that the base rate may remain constant for a while.

"Recent developments have boosted the chances that rates have peaked at 5.75 per cent," said Simon Ward, chief economist at New Star Management.

"The July MPC minutes suggest that the committee no longer has a tightening bias: the three dissenters will clearly resist further action any time soon, while even the hawks now characterise the policy stance as restrictive."

New Star Management now predicts that the MPC will not increase the base rate again until at least November.

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