(1888PressRelease)
July 02, 2008 - London (Longdogfinance): The policy makers at the Bank of England policy-makers calmed down all the market expectations of any early interest rate rises. The MPC wanted to avoid a marked economic slowdown which might pull the inflation rate below the target. The economic picture before the BOE was encouraging for a medium term interest hike. The inflation rate is expected to rise above 4 percent in 2008 and the MPC is more concerned about expectations of price rises becoming entrenched.
The down turn of the economic parameters ensures that inflation does not persist above the target level. But at the same time, The apex bank needs to avoid a slowdown that is so pronounced that it would pull inflationary forces down. The decrease needs to be below the target. The interest rate parameters rose during the last few months and it was the reason why central bank did not raise rates as early as markets expect. After the rise in annual inflation to 3.3 percent in May above the target of 2 percent, the insiders of the financial markets had been anticipating that there is a good chance of a rate increase in August and possibly more before the end of 2008.
As an effect of the rising inflation, British economic growth slowed to 0.4 percent in the first quarter of 2008. This was the weakest rate for last three years.
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