Commenting on the minutes published by the Bank of England of the MPC meeting on 6 and 7 July, Tom Vosa, chief economist said:
"The vote in favour of keeping rates on hold was a much tighter decision than we had been expecting. It seems that a cut in August is now a virtual certainty.
"However, markets that are looking for a half per cent off 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 lending data for June showing some increase in mortgage borrowing, as lower mortgage rates encourage consumers to consider house purchases.
"It seems that after a slow first half of the year, both retailers and homeowners can look forward to a better summer. Whether the committee will cut rates as aggressively as the market seems to be hoping is still uncertain. A weaker exchange rate and higher equity prices - combined with some evidence of output stabilising - suggests the MPC can afford to wait a while after August."
