08.01.2004

Banks Hold base rates

The bank of England have decided to leave the base rate for Sterling unchanged for a second consecutive month at 3.75%.
The move was widely anticipated.

The announcement was greeted positively by business and Union groups alike, given widespread concerns among exporters over the strength of Sterling against the dollar.

It would seem that the banks Monetary policy committee have elected to wait and see how UK inflation statistics start the new year and have taken notice of sterlings strength.

In November the committee increased the base rate by a quarter of a percent from a 47 year low but then decided to hold the rate in December, a highly unusual pattern.

Most commentators do expect the Bank to increase the rate in February, in light of the continuing strength of UK consumer spending and house prices, most likley by a further quarter percent with rates moving up slowly during the year to end 2004 at 4.5%.

The European Central Bank in Frankfurt had a seemingly simpler decision, given the overall Eurozone's mixed economic recovery and the strength of the Euro. They left the base rate unchanged at 2%.