By Jennifer Ryan
April 18 (Bloomberg) -- Bank of England policy makers voted 7- 2 to keep interest rates unchanged for a third month in April, with Timothy Besley and Andrew Sentance in favor of a quarter- point increase.
The majority of the Monetary Policy Committee said the rate should stay at 5.25 percent, with some members predicting inflation to slow to the 2 percent target in the next few months and others cautioning(v. 警告) that investors had only a "limited expectation'' of higher borrowing costs. Besley and Sentance said inflation risks were strong enough to warrant a rate increase.
Policy makers at the April meeting didn't see yesterday's data showing inflation in March at the fastest pace in a decade. The report forced Governor Mervyn King to assure Chancellor of the Exchequer Gordon Brown that the bank "remains determined'' to contain consumer prices, and sent the pound above $2 for the first time since 1992.
"With two members voting for a hike, it suggests the bank is going to raise rates in May,'' said James Knightley, an economist at ING Financial Markets in London. "There's also a risk of another hike further out.''
The pound rallied as high as $2.0133, the highest level since 1981, after the release of the minutes, as investors raised bets the bank will lift borrowing costs. The currency was trading at $2.0118 as of 10:05 a.m. in London.
The implied yield on the June interest-rate futures contract was at 5.83 in London, up from 5.6 percent on March 14. The contract settles to the three-month London interbank offered rate for the pound, which averaged about 15 basis points more than the central bank benchmark(n. 基準) for the past decade.
'Balance of Risks'
"For some members, there was no compelling case for a change in interest rates this month,'' the minutes said. "Other members also concluded that no change in Bank Rate was warranted this month, but that the balance of risks to inflation remained on the upside in the medium term.''
Besley and Sentance argued consumption was "firm,'' business investment and global demand were "strong,'' and there was evidence to suggest firms had more scope to increase prices. Demand pressures may limit the pace at which inflation slows to target, they said.
Inflation unexpectedly quickened to 3.1 percent in March, the fastest since 1997, the government said yesterday. King's letter to Brown, the first by a bank governor since its independence a decade ago, was triggered by inflation deviating more than a percentage point from the central bank's target.
"Brown made the bank independent, and it was the right decision,'' said Willem Buiter, a former U.K. central bank policy maker who is now a professor at the London School of Economics. "If they don't act appropriately, they will lose credibility, but that won't happen. The bank continues to be successful.''
All 43 economists in a Bloomberg News survey predict a majority will form for a rate increase at the bank's next rate meeting in May.
"Following that inflation data, the call for rate hikes will be followed by all,'' said Gavin Redknap, an economist at Standard Chartered Bank in London, in an interview.
----------
By mei
沒有留言:
張貼留言