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Loans boost as rates may have peaked

12 May 2005

The speculation that the current interest rate of 4.75 per cent is likely to come down this year, was stoked by the Bank of England's quarterly report which indicated that it was unlikely rates would go up anytime soon.

The Guardian reports that Mervyn King, governor of the Bank, admitted while presenting the quarterly inflation report that the monetary policy committee were surprised by the weak economic data presenting itself in the past few months.

The report presented by Mr King detailed a flatter profile for inflation across the next two years (the artificial horizon imposed by the MPC) and made clear that the MPC believed that the decline in house prices was potentially associated with a more drawn-out deceleration in price.

There was a mixed response to the report, with John Butler from HSBC declaring that it indicated that the bank's stance was one of ambiguity, responding as required in either direction, while other analysts felt that the tone of the report was indicative of a lean toward lowering rates.