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ARTICLE · 10 MAY 2005

Economic Update – Interest rates could soon start falling.

Roger Bootle’s response to May’s MPC meeting

United KingdomStrategy
Roger Bootle, Economic Adviser, Deloitte
Roger Bootle, Economic Adviser, Deloitte
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  • Today’s decision by the MPC to keep interest rates on hold at 4.75% for the ninth month in a row all but confirms that interest rates have peaked, in line with my longstanding forecast.
  • If the MPC was going to raise interest rates once more, arguably this would have been the month to do it given that CPI inflation rose from 1.6% in February to a seven year high of 1.9% in March and given that this is an Inflation Report month. But the no change announcement suggests that the Committee is more concerned about the recent slowdown in activity than the oil-induced spike in inflation.
  • GDP growth in Q1 of this year is provisionally estimated to have fallen from 0.7% in the fourth quarter of last year to 0.6%. And the more up-to-date figures suggest that the consumer slowdown is gathering pace.

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