|
U.K. hikes interest rates
|
 |
February 10, 2000: 7:18 a.m. ET
Bank of England boosts short-term rate to 6% despite pound's strength
|
LONDON (CNNfn) - The Bank of England raised U.K. interest rates by a quarter of a percentage point to 6 percent Thursday in a widely-anticipated move likely to be followed by further tightening of monetary policy later in the year.
The hike in the benchmark discount rate follows a similar rise last month and is the fourth in six months as the Bank's Monetary Policy Committee seeks to calm inflationary pressures.
Markets had expected the MPC to raise rates by either a quarter or even half a percentage point following the release of data pointing to the economy's continuing strength since its January meeting.
The decision was priced into the blue-chip FTSE 100 index, which was down 58 points at 6257, about where it was before the announcement.
The strength of the pound, primarily against the euro, has been one of the few factors arguing against a further rise in rates, with a 2 percent rise since the last MPC meeting. The currency was trading at $1.6086 after the announcement, just where it was prior to the hike, and about 0.9887 against the euro. "The pound's strength is tightening monetary conditions in the U.K., but it's not enough," said Stewart Newnham, treasury strategist at State Street Bank in London.
House prices, which have fuelled inflationary fears, rose 18 percent in the year ended in January, according to Halifax, Britain's largest mortgage bank. Strong retail sales figures released earlier this week confirmed the buoyant trend, which the MPC believes threatens its 2.5 percent inflation rate target.
The Bank is due to release its quarterly inflation report next week.
"The markets are anticipating that the Bank is likely to raise to or near 7 percent by the end of the year," added Newnham.
The MPC's move is the latest in a line of central bank efforts to choke off inflationary pressures driven in part by rising commodity prices and the continuing strength of the U.S. consumer boom.
The European Central Bank raised rates in the 11-nation euro-zone to 3.25 percent on Feb. 2, a day after the U.S. Federal Reserve added a quarter percentage point to U.S. rates. 
|
|
|
|
|
 |
|
