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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
6/5/08
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Highlights
As expected, the Bank of England kept its key interest rate at 5 percent. The monetary policy committee had last lowered rates by 25 basis points at its April meeting. The MPC is in a bind. Inflation is rising while growth is slowing. In his remarks after the release of the quarterly Inflation Report last month, governor Mervyn King commented that he expected inflation to rise even higher than its current bloated 3 percent level. The Bank of England has a 2 percent inflation target. Should inflation rise or fall more than 1 percent, the Bank governor is required to write a letter or remit explaining how it planned to bring inflation into line with the target once again.
Recent economic data have been weak including today's house price data which showed prices declining at a more rapid rate. And the services sector PMI released earlier this week showed activity edged below the 50 breakeven reading to 49.8. While new data on industrial and manufacturing output will not be available until next week, both declined more than expected in March.
The Bank's 5 percent lending rate is the highest among the Group of Seven nations while Japan's 0.5 percent is the industrialized world's lowest.
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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 | Consensus Data Source: Market News International and Thomson Financial
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