17 Sep

Rate rise advocate changes stance

Rate rise advocate changes stance

The solitary advocate of a rise in the Bank of England base rate on the monetary policy committee (MPC) has altered his position.

Publication today of the minutes of the September MPC meeting revealed that Tim Besley, who voted to raise the rate in July and August, supported the majority in holding the rate this month.

David Blanchflower maintained his position of voting for a 0.25 per cent cut.

The shift in Professor Besley's position may increase the likelihood that the next change in the base rate will be down rather than up, which could help lower the cost of mortgages.

According to the Bank's governor Mervyn King, the rate of consumer prices index inflation is likely to peak soon at around five per cent and will then fall back.

Mr King's thoughts were expressed in a letter to chancellor Alistair Darling and match the analysis of other economists such as Howard Archer of Global Insight.

Mr Archer said: "This should allow the Bank of England to bring interest rates down to 3.5 per cent in 2009, regardless of whether it starts cutting this year, or delays acting until early 2009."

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