Abbey: Bank of England base rate decision

Barry Naisbitt, Chief Economist at Abbey, comments on Bank of England base rate decision: "The Monetary Policy Committee (MPC) today reacted to the evidence of slowing economic growth by announcing a cut in Bank Rate, from 5.25% to 5.00%. This decision was hinted at back in the February Inflation Report, although its timing was uncertain.

"Slowing economic growth, particularly shown by survey indicators of output, and a weaker housing market will have played a part in the decision. The reduction should help to bolster consumer confidence at a time of continued uncertainty.

"The MPC has taken a forward-looking view that slower growth is likely to reduce medium-term inflationary pressures and has been able to cut rates because of its focus on medium-term inflation, but is well aware that energy and food price rises are likely to raise inflation in the near term. The Bank of England's Inflation Report spelt this out and the MPC will be monitoring trends in both inflation and growth very carefully as this higher inflation emerges."