SMPC votes for rate cut - April 2008

SMPC members vote for a rate cut by six votes to three

In its latest monthly E-mail poll the IEA Shadow Monetary Policy Committee (SMPC) voted by six votes to three to cut UK Bank Rate from its current 5.25% on Thursday 10th April, rather than wait until 8th May, when the next set of Bank of England Inflation Report forecasts will be available to the Monetary Policy Committee. Five SMPC members wanted to cut the official discount rate by 0.25% on 10th April, one wanted a 0.25% reduction to 4.75%, and three were ‘holds’. Looking further ahead, five of the SMPC rate cutters had a bias towards further rate reductions, while two out of the three holders also had a bias to cut. Virtually all the SMPC members were concerned about the problems that had arisen in the market for credit, including the widening spreads between money-market and official discount rates. However, several SMPC members also pointed out that the official statistics and industrial surveys showed only limited evidence of a UK hard landing so far. One SMPC member was concerned about the inflationary consequences of the weak pound at a time when global inflation was already running above the UK target rate.

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