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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
11/8/07
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Change
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Highlights
As expected the Bank of England left its key interest rate at 5.75 percent after increasing the rate five times in the past year. The rate is the highest among the G7 countries. The economy is expected to slow as past rate increases take hold and the Bank continues to evaluate the impact of the global credit crunch. Thanks to growth in the service sector which accounts for about 75 percent of GDP, the economy has been growing above trend at about 3 percent when compared with the previous year. But higher borrowing costs and tame house price gains along with the credit crunch could dampen consumer spending. Manufacturers are also finding it harder to compete in world markets as the pound soars in value against the dollar and makes exports more expensive. At the same time, record oil prices are squeezing profits margins. The Fed cut its fed funds target rate to 4.5 percent last week, while the Bank of Japan kept its key rate at 0.5 percent. And on Wednesday, the Reserve Bank of Australia increased its key rate to 6.75 percent. The inflation target of the Bank is 2 percent. As is usual, the Bank did not issue a statement, rather analysts and bank watchers will have to wait for two weeks.
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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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