Wednesday, November 22, 2006

Forex News: BoE voted 7:2 for the kea interest rate increase

Forex News

Today the Bank of England published the minutes of the Monetary Policy Committee meeting held on 8 and 9 November 2006, where the members of the Committee made the decision to increase the repurchase rate by 0.25%, to the level of 5.0%. Seven members of the Committee voted for the rate increase, while two were against it.

The Committee made the decision having initially discussed major economic issues such as British financial markets, international economy, money, credit, demand and supply, as well as labor market and inflation expectations.

The report highlights that the economy of Great Britain have grown at its average pace. However, the uncertainties are around the supply, since this field has passed through the shock reflecting oil and import prices.

The majority of companies reacted with misbalance of actual costs and wages for rising oil and import prices. This was certainly reflected in lowing productivity and growing unemployment, while there are speculations that the employers can demand wages increase.

The inflation risks are also connected with the strong growth of equity prices and house prices. The credit demand has grown, which means that further asset price appreciation is to come.

The balance of risks described above can result in stronger inflation pressures, which was the reason for the Bank of England to increase the interest rate.


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