Econoday Report: BOE Announcement 2, 2007

2007 U.S. Economic Events & Analysis

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BOE Announcement

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

Released on 8/2/07

Change
Actual	0bp
Previous	25 bp

Level
Actual	5.75%

Highlights
As expected, the Bank of England's Monetary Policy Committee kept its key interest rate at 5.75 percent. The Bank last increased its key rate at its July 5 meeting. According to the minutes, the MPC was split on whether to increase rates by a margin of six votes for to three votes against. Its interest rate compares with 5.25 percent in the U.S., 4 percent in the EMU and 0.5 percent in Japan. Inflation as measured by the consumer price index was up 2.4 percent on the year in June after increasing by 2.5 percent in the previous month. The Bank's inflation target is 2 percent. The quarterly Inflation Report will be released on August 8.

Trends

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

2007 Release Schedule

Released On: 1/11 2/8 3/8 4/5 5/10 6/7 7/5 8/2 9/6 10/4 11/8 12/6

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