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BOE Announcement
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Definition
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
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| Released on
10/4/07
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Change
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0bp
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Highlights
As expected, the Bank of England left its key policy interest rate at 5.75 percent. Expectations were high that the Bank would increase interest rates again this fall to cool demand and inflation. However that was before the credit crunch, the bail out of Northern Rock and the ensuing difficulties that some institutions had in securing funds. Inflation is down from its peak of 3.1 percent in March to below the Bank of England inflation target of 2 percent, but it remains uncomfortably close to the target. The Bank last increased its key rate in July by 25 basis points to its current level. Some analysts think that the rate increases that have already occurred have yet to exert their restraining effects on spending and now that banks are more wary about lending to other than those who are good credit risks. That means that those with weaker credit standing will have to pay more.
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Trends
![[Chart]](chart.gif)
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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. |
Data Source: Haver Analytics
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