Bank holds rates but cuts seen in 2009
The Bank of England left interest rates on hold at 5.0 percent for a fifth month running on Thursday, but most economists expect sharp cuts next year.
RBS profits up 9 percentWith inflation more than double the central bank's 2 percent target, all 67 economists polled by Reuters had expected the Monetary Policy Committee to keep rates unchanged.
Still, interest rate futures slipped as some investors had priced in the outside chance of a cut due to the speed and scale of Britain's economic slowdown.
Money markets are pricing in a good chance of three quarter-percentage point cuts by this time next year.
"We continue to see rates being cut - but not until next year when the inflation peak should have passed," said George Buckley, chief UK economist at Deutsche Bank.
The European Central Bank kept interest rates on hold at 4.25 percent as expected on Thursday, faced with a similar difficult mix of weak economic activity and strong inflation.
Recent economic news in Britain has been unremittingly grim. House prices are tumbling, unemployment is rising and consumer confidence is at rock-bottom.
Figures out just before the Bank decision showed house prices fell a record 12.7 percent on the year in August, according to Britain's biggest mortgage lender HBOS. New car registrations also fell 18.6 percent on the year in August to the weakest number of sales since 1966.
The Organisation for Economic Cooperation and Development said this week that Britain's economy looked like shrinking in the third and fourth quarters of this year. That would meet the common definition of a recession.
CONFLICTING VIEWS
|
|
