Central bank governor and deputy governor did not agree on interest rates

 

March 29, 2008

Following the recent Monetary Policy Committee meeting earlier this month the Bank of England announced that it would be keeping interest rates on hold at 5.25%, stating that the risk of rising inflation had to be considered in addition to the slowing economy. Interest rates have already fallen twice since December, and industry experts predict that they will fall at least one more time before summer and then again in the latter half of the year.

According to the minutes from the March Monetary Policy Committee meeting there was a 2-7 split over whether interest rates should be cut in March, with the Deputy Governor of the Bank of England, Sir John Geive, agreeing with MPC member David Blanchflower that rates should be cut by a further 0.25%, which would have taken the base rate from 5.25% to 5%. However, the other seven members of the committee, including the Governor of the Bank of England, Mervyn King, wanted interest rates to be kept on hold.

The Bank of England has not taken the stance of the US Federal Reserve, which has been slashing its interest rates lately in order to try and keep recession at bay. Over the past six months the US Federal Reserve has cut the interest rates by a massive 3%, taking them from 5.25% to 2.25%. However, following the majority vote the Bank of England decided to keep rates at 5.25%. Analysts and economists are now speculating over whether there will be a further base rate cut following April’s Monetary Policy Committee meeting, although many think that the next base rate cut may come in May.

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