City kept guessing over rate cut
Minutes of the 3 July monthly meeting released yesterday confirmed that the Chancellor's and Governor's views about interest rate policy have diverged. If Mr Clarke has taken the plunge again, it will mark his most serious clash yet with Mr George.
Economists in the City were still divided yesterday about whether he would reduce base rates for the fifth time since December. Ian Shepherdson at HSBC Markets said: "These decisions are not predictable, but it is hard to see any real gain in doing it now rather than around party conference or Budget time."
This view was reinforced by mortgage lenders signalling a reluctance to reduce mortgage rates again. A spokesman for Halifax, the biggest lender, said: "Mortgage rates are at a 30-year low and I don't think they have much further to go."
On the other hand, Paul Mortimer-Lee, chief economist at Paribas, argued that this month presented Mr Clarke with his last window of opportunity. "Time is running out. The Chancellor would like another rate cut and here is one of the last chances he has."
The Bank of England has made plain its opposition to additional reductions in the cost of borrowing, and suggested that increases will soon be on the cards.
According to the minutes released yesterday, Mr George said the quarter- point June reduction to 5.75 per cent had increased the danger that the Government would not meet its inflation target.
He said the forward-looking indicators of inflation such as surveys, money and credit growth and the housing market were stronger than they had been in June. The Bank "would advise strongly against any further interest rate cut on the basis of current evidence".
Mr Clarke acknowledged that he and the Governor remained "slightly apart", although he agreed that interest rates should remain unchanged in July. He also agreed that the economy was gathering strength - but at not too rapid a rate.
"If growth did accelerate to the point where the inflation target was being put at risk, there would be sufficient time to act prudently," he argued.
- 1 Christians: The world's most persecuted people
- 2 Israel-Gaza conflict: The secret report that helps Israelis to hide facts
- 3 Thatcher ‘was warned of Tory child sex party claims’
- 4 Lauren Goodger sex tape: Reality star calls for tougher laws on revenge porn after intimate video leaks online
- 5 The Simpsons Family Guy trailer: First look at crossover episode after Comic-Con debut
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
Thatcher ‘was warned of Tory child sex party claims’
Israel-Gaza conflict: President Obama presses Netanyahu to call ‘immediate and unconditional’ Gaza ceasefire
Lauren Goodger sex tape: Reality star calls for tougher laws on revenge porn after intimate video leaks online
Iraq crisis: End 'very near' for Christianity after Isis takeover, says Bishop
Israel-Gaza conflict: The secret report that helps Israelis to hide facts
A day in the life of Vladimir Putin: The dictator in his labyrinth
Opponents of Israel's military operation in Gaza are the real enemies of Middle Eastern peace
Were 'Poor Doors' added to mixed developments so wealthy residents don't have to go in alongside social housing tenants?
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
iJobs Money & Business
£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...
£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...
£30000 - £45000 per annum: Harrington Starr: A Global Financial Service Organi...
£30000 - £40000 per annum + Bonus+Benefits+Package: Harrington Starr: C# Web d...