FXstreet.com (Barcelona) - The Monetary Policy Committee of the Bank of England voted for 7 votes against 2 to keep Bank Rate on hold at 5.25% at their March monetary policy meeting in a context of growing economical uncertainty derived from the downturn in US economy and the further deterioration of financial markets.
According to the Banks minutes, the sentiment in financial markets has deteriorated over the month probably reflecting
heightened concerns about counterparty credit risk, there have not Ã‚Â¡been specific reports about major unexpected losses in European banks in so far, however, declining prices of assets have pushed borrowers to sell assets which translates into further losses in assets prices.
Major news in financial markets have driven the Dollar 3% lower on the month the Bank affirms that These movements appeared to be broadly consistent with conjunctural developments and expectations of larger cuts in US and UK policy rates than in the euro-area rate.
The concern over US economy has been underlined in the report, as the latest news point out to a very short growth of US economy in the fourth quarter of 2007, the manufacturing sector's activity is showing figures close to contraction and households are facing higher interest rates, consumer confidence, with these premises, is falling to a 16 year low.
In the UK, unemployment is increasing steadily, although the growth seems to have weakened slightly in the three months to January. Inflation has risen to 2.2% , yet somewhat lower than expected, according to the Bank.
In this context, the decision was approved by 7 members while John Gieve and David Blanchflower voted against, preferring a reduction in Bank Rate of 25 basis points.