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THURSDAY 23RD JUNE 2005
 INTEREST RATE CUT SOON?

Minutes of this month’s Monetary Policy Committee meeting that showed two members voted for rate cuts fuelled an immediate reaction in the money markets yesterday as experts interpreted a significant shift in the way policymakers are thinking. Marian Bell and Charles Bean voted for an immediate quarter point cut in interest rates, the Bank of England minutes released yesterday show.

Both argued that a weakening euro combined with higher oil prices and reports from several sectors of the economy pointing to a slowdown, justify a rate reduction now. A cut, they said, was also warranted now to stop "the slowdown in consumption becoming more entrenched."

But the other seven felt the competing risks of slowing household spending and rising inflationary pressures had not been resolved and voted to leave interest rates unchanged at 4.75%.

"There was time to gather further evidence on the depth and extent of the slowdown in consumption to see if lower interest rates were warranted," the majority argued, according to the minutes.

The discussion of lower interest rates signaled a marked change in mood, as for several months now Bank of England deputy governor Andrew Large and sometimes Paul Tucker have been calling for a rate rise.

City experts speaking to Reuters said the vote suggests a cut in rates is now looking more likely.


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