BoE says part reversal in sterling's decline should ease inflationary pressure 10.07.2003 13:14 Headlines
LONDON (AFX) - In its statement accompanying its decision to cut the repo
rate by 25 basis points, the Bank of England's monetary policy committee
identified the part reversal of sterling's decline as a key development.
Noting the drop in sterling since the start of the year, the MPC said: "In
recent weeks that fall has been partly reversed, reducing the prospective impact
on inflation."
The decline in sterling earlier this year was cited by the MPC as the key
reason for not cutting rates at the May and June policy meetings.
The majority of the MPC had cited the rising inflationary pressures from a
weaker pound.
In a recent newspaper interview, newly installed BoE governor Mervyn King
appeared to hint at a rate cut, analysts said, by citing the partial recovery in
sterling in recent weeks as "perhaps the most significant change" for the Bank
to consider.
The MPC also said that "output growth in the UK has recently been below
trend," with slower consumer demand and "subdued" private investment offsetting
the impact of higher government spending.
While the MPC acknowledged that retail price inflation has been running
above the 2.5 pct target, "this is the result of temporary factors which are
expected to unwind in the coming months," it said.
External factors are also not supporting UK growth, the MPC said.
"The global economic recovery has remained hesitant," it said.
chris.anstey@afxnews.com
cxa/cw
