 | |  | | BoE MPC raises key repo rate by 0.25 points to 4.50 pct UPDATE
2004-06-10 19:10
(Adds comments from MPC)
LONDON (AFX) - The Bank of England raised its key repo rate another 0.25
points to 4.50 pct, following the latest meeting of the rate-setting Monetary
Policy Committee.
The decision was widely anticipated, with the raft of strong data this
week cementing expectations of the first back-to-back increase since early
2000.
The MPC said in its accompanying statement that economic data and surveys
continue to suggest that the UK economy is growing at, or above, trend, while
cost pressures are mounting.
"Household spending, public consumption and investment have all grown
strongly and the housing market remains buoyant," the MPC said.
In addition, the MPC said cost pressures are mounting, while the labour
market has tightened further.
"As indicated in the May Inflation Report, a small and diminishing margin
of spare capacity means that inflationary pressures are likely to continue
building," the MPC added.
The move today is the fourth 0.25 point increase by the Bank since
November as it seeks to rein in soaring consumer debt and a rampant housing
market, which is going from strength to strength despite previous hikes.
The latest survey from the Halifax bank found house prices accelerating
once again, with year-on-year inflation running above 20 pct.
More and more analysts are now warning of a potential housing market
crash.
In addition, strong manufacturing data for April is likely to have eased
concerns that higher borrowing costs are hitting the industrial sector hard.
Nevertheless, the decision to raise interest rates has taken place in an
environment of subdued inflation and lower-than-expected first-quarter
growth.
Further interest rate increases are expected this year, with some
forecasters predicting the benchmark repo rate will rise above 5.00 pct by
the end of 2004. |  |  |  |  |
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