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Bank voted 8-1 to hold UK rates Bank voted 8-1 to hold UK rates
(41 minutes later)
Policymakers at the Bank of England voted 8-1 to keep UK interest rates at 5.75% earlier this month, minutes show.Policymakers at the Bank of England voted 8-1 to keep UK interest rates at 5.75% earlier this month, minutes show.
The one policymaker who did not vote to hold rates, David Blanchflower, wanted to trim rates to 5.5%.The one policymaker who did not vote to hold rates, David Blanchflower, wanted to trim rates to 5.5%.
The minutes indicated that the members of the Bank's Monetary Policy Committee (MPC) agreed the financial market turmoil would affect the economy. Most of the Monetary Policy Committee (MPC) members wanted to wait for more evidence of how the recent financial market turmoil has hit the economy.
The remarks are expected to raise hopes that the Bank will cut UK rates sooner rather than later. The minutes said an early rate cut might make it appear the MPC was more worried about markets than inflation.
Wait and see
The MPC is tasked with hitting the government's inflation target of 2%. On Tuesday, the latest price data showed inflation remained unchanged at 1.8% in September.
The November inflation report projections are going to be of critical importance in determining whether rates do fall this year or not Philip Shaw, Investec
The last increase in UK interest rates came in July, when they rose to 5.75% from 5.5%. At the time, many analysts expected rates to hit 6% by the end of the year.
However, the recent credit crunch on the world's financial markets, which led to the crisis at Northern Rock, has led many economists to amend their forecasts, with some now predicting a rate cut before too long.
The next quarterly inflation report from the Bank of England, due in November, could now prove key for the short-term direction of interest rates.
"The preparation of the November Inflation Report and its projections would give the committee more opportunity both to assess the impact of market turbulence and other developments in order to reach a more considered judgement and to explain its policy stance," the MPC minutes said.
"It was possible that a cut in rates this month could be misinterpreted as a signal that monetary policy was focused on supporting the financial system and not on meeting the inflation target."
The minutes noted that so far there had "been only limited signs of slowing in the economy". Surveys of business activity had remained firm, while the slowdown housing market activity was consistent with a gradual easing rather than a crash.
The minutes said that there was some evidence that credit conditions had tightened for business.
However, they added that "the extent and duration of any tightening and its impact on the rest of the economy was still uncertain".
Tough call
Analysts gave a mixed reaction to the latest set of MPC minutes.
"The November inflation report projections are going to be of critical importance in determining whether rates do fall this year or not," said Philip Shaw at Investec.
"Whilst the case for lower rates is not yet done and dusted, a November cut remains our central view."
However, Jonathan Loynes at Capital Economics said the minutes "support the view that the majority of committee members are in no desperate rush to cut interest rates".
"The fact that David Blanchflower voted for an immediate cut is no great surprise given his very dovish voting history, and on past form at least, does not signal his colleagues are about to join him," he added.