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Resource Center » U.S. & International Recaps | Release Dates | Why Investors Care | Today's Calendar
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BOE Announcement
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Definition
The Bank of England Monetary Policy Committee consists of nine members. The Committee meets monthly for two days, usually during the first week in the month in order to determine the near-term direction of monetary policy. Changes in monetary policy are announced immediately after the meetings, but no details are available until the minutes are published two weeks later. Why Investors Care
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| Released on
2/8/07
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Highlights
Analysts were wary prior to today's monetary policy announcement after being shocked by last month's unexpected interest rate increase. But today's decision held no surprise. The Bank of England's Monetary Policy Committee left their policy interest rate at 5.25 percent. The rate is the same as the U.S. fed funds rate. Inflation as measured by the consumer price index has been at or above the Bank's inflation target since July 2005, with a brief pause in March 2006. December's CPI was up 3 percent when compared with last year, considerably above its 2 percent inflation target. Fourth quarter GDP was up 3 percent when compared with the same quarter in the previous year. The Bank followed its normal practice of making no statement accompanying the decision to leave rates unchanged. Rather, Bank of England watchers will have to wait until the minutes of the meeting are released on February 21.
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Trends
![[Chart]](chart.gif)
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The Bank of England's primary goal is to contain inflation and it uses an inflation target to do so. The Monetary Policy Committee has been using the harmonized index of consumer prices for its inflation indicator - the CPI - since January 2004. The Bank's inflation target has been 2 percent since that time. Previously, the MPC used the retail price index excluding mortgage interest payments as its inflation indicator and a 2.5 percent inflation target. There has been a substantial spread between the two measures of inflation which can be traced to the way they are calculated. Among the key differences is the exclusion of council taxes and owner-occupied housing costs from the CPI. Arithmetic means are used to combine individual prices to construct the RPIX while geometric means that allow for substitution are used in calculation of the CPI. This formula differential accounts for nearly half of the difference in the two rates. |
Data Source: Haver Analytics
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