The Bank of England’s rate setting committee voted 5-4 to leave its benchmark interest rate unchanged at 4.75 per cent, according to the minutes of the meeting. In June the vote had been 7-2.
Chief Economist Charlie Bean, Kate Barker, Stephen Nickell and new MPC committee member David Walton argued in favour of a quarter-point reduction in rates. Governor Mervyn King led the majority in favour of holding the rate unchanged for the eleventh month.
Tom Vosa, chief economist at National Australia Bank Group, said: “The vote in favour of keeping rates on hold was a much tighter decision than we had expected. It seems that a cut in August is now a virtual certainty.
“However, markets that are looking for a 0.5 per cent reduction by the end of 2005 and possibly a further cut early in 2006 may be disappointed.
“There is evidence that the economy is stabilising with preliminary data for June showing some increases in mortgage borrowing as lower mortgage rates encourage consumers to consider house purchases.”
Ross Walker, economist at the Royal Bank of Scotland Group plc, commented: “August is pretty much a certainty and it’s an open question as to whether we get one more before the end of the year.”
David Bexon, chief executive of SmartNewHomes.com, said with four of the nine members voting for a reduction and the MPC acknowledging the changes in economic circumstances, a decrease in the Base Rate is certainly just around the corner.
“A decrease in the Base Rate will increase consumer confidence and could be the catalyst to ensure that we see positive growth in house prices this year,” he said.
