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2008 Economic Calendar |
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The Bank of England Monetary Policy Committee consists of nine members. The Committee meets monthly for two days, usually during the first week in the month in order to determine the near-term direction of monetary policy. Changes in monetary policy are announced immediately after the meetings, but no details are available until the minutes are published two weeks later. Why Investors Care
| Released on 7/5/07 | |||||||||||||||
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Highlights
As expected, the Bank of England's Monetary Policy Committee increased its key interest rate by 25 basis points to 5.75 percent. According to the minutes of the June 7 meeting, the MPC vote was split on whether to increase rates. They voted five to four to leave rates unchanged.
In its statement, the MPC said
"The Bank of England's Monetary Policy Committee today voted to raise the official Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.75%.
In the United Kingdom, output growth has remained firm and appears to be evolving in line with the Committee's most recent projections. Credit and broad money continue to grow rapidly. The pace of expansion of the world economy remains robust.
CPI inflation fell back to 2.5% in May. Lower gas and electricity prices mean that CPI inflation is likely to continue to fall back to around the 2% target in the course of this year. Although pay pressures remain muted, the margin of spare capacity in businesses appears limited and most indicators of pricing pressure remain elevated.
The Committee judged that, relative to the 2% target, the balance of risks to the outlook for inflation in the medium term continued to lie to the upside. Against that background, it further judged that an increase in Bank Rate of 0.25 percentage points to 5.75% was necessary to meet the 2% target for CPI inflation in the medium term.
The minutes of the meeting will be published at 9.30am on Wednesday 18 July.
The previous change in Bank Rate was an increase of 0.25 percentage points to 5.5% on 10 May 2007."
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The Bank of England's primary goal is to contain inflation and it uses an inflation target to do so. The Monetary Policy Committee has been using the harmonized index of consumer prices for its inflation indicator - the CPI - since January 2004. The Bank's inflation target has been 2 percent since that time. Previously, the MPC used the retail price index excluding mortgage interest payments as its inflation indicator and a 2.5 percent inflation target. There has been a substantial spread between the two measures of inflation which can be traced to the way they are calculated. Among the key differences is the exclusion of council taxes and owner-occupied housing costs from the CPI. Arithmetic means are used to combine individual prices to construct the RPIX while geometric means that allow for substitution are used in calculation of the CPI. This formula differential accounts for nearly half of the difference in the two rates. |
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