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No change in base rate, says Bank

Thursday 10th January 2008

In its January meeting this week, the Bank of Englands monetary policy committee voted to maintain the base rate at its current level of 5.5 per cent.

The decision follows a quarter-point reduction in the Banks interest rate in December after disruption to the economy from the credit crisis.

But a stay on the rate was widely anticipated this month, with seven of eight economists in a poll earlier this week predicting the result.

The Royal Bank of Scotland, Lloyds TSB, HSBC and Halifax were all expecting the vote to result in the current rate being maintained.

Analysts Howard Archer of Global Insight, Vicky Redwood of Capital Economics and the Centre for Economic and Business Research also correctly guessed the outcome.

Barclays Capital was alone in predicting a 25 basis point reduction - equivalent to a quarter of a per cent.

UK economist at the financial services provider Simon Hayes explained ahead of todays announcement: "We now expect 25 basis point rate cuts in January, February and April, taking Bank Rate to 4.75 per cent."

"We had previously expected cuts in February and May," he added - a forecast which the organisation may now revert to.

Ross Walker, UK economist at the Royal Bank of Scotland, revealed that he also expects any cut to come in February, to coincide with the publication of the next inflation report.

This prediction was echoed by Mr Archer, chief UK and European economist at Global Insight, who foresaw a "very tight vote".

"Ive been sitting fairly firmly on the fence recently and getting splinters in my backside," he added.

But ultimately he argued for a February rate cut - having noted in previous months that such decisions typically come alongside the quarterly inflation report.©

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