When the Bank of England's monetary policy committee (MPC) delivered its verdict on interest rates for this month at noon today few would have been surprised. It decided to keep the base rate at five per cent, following its vote to cut the rate last month.
All nine experts polled by Adfero last week thus turned out to be right in their prediction, even if some, such as Global Insight's chief UK and European economist Howard Archer, suggested that a cut could not be ruled out.
It was also a vindication of the majority view among the economists polled by Reuters, of whom just five out of 65 tipped a cut this time.
Yet however much the decision had been expected, not least because there had been a cut last month and the rate has not been changed in successive months since May and June 2004, for those who believed such a move was necessary to boost the property market there was disappointment.
For Council of Mortgage Lenders Director General Michael Coogan, understanding of the difficulties the Bank of England may have to contend with as it tries - to borrow MPC terminology - balancing upside and downside risks, it was still bad news.
He said: "We understand the conflict between slowing economic growth and rising inflationary pressures and the uncertainty over some of the data reflected in the split views of MPC members last month. However, the MPC had an opportunity to act to anticipate the worsening economic environment today and it is disappointing that there has been no change."
Simon Rubinsohn, senior economist at the Royal Institution of Chartered Surveyors (Rics), took a similar view, commenting: "While the Rics appreciates the risks associated with the recent pick up in inflation and acknowledges the danger of it moving into 'letter writing' territory during the second half of the year, the tone of recent data and surveys suggest that the threat of a sharp slowdown in economic activity is the more pressing issue for the authorities." He concluded with a call for a rate cut of half a per cent next month if the situation does not improve.
While that may be an optimistic request, the chances of a cut next month may be far from slim. Firstly, this would be a continuation of the pattern of lternation between cutting and holding that began with the trimming from 5.75 per cent to 5.5 per cent last December. Secondly, those same 65 economists who mostly told Reuters there would be no change this time took a different view over June, with 40 per cent forecasting a reduction.
Such optimism was expressed by insurers Legal and General, which said it was "just a matter of time" before the next reduction. Perhaps the publication of the quarterly inflation report next week and the minutes of the meeting seven days later will give a clearer indication to the property industry and everyone else whether it will indeed happen next month.
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