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Central policy rate Settlers retain bank base rate

So the central policy rate setters have, in spite of pressure, held their nerve for another month and retained the bank base rate at 0.5%. This means we have now had two years without a change.

Momentum appeared to have moved further towards a rate rise at the meeting in February with three members voting for an increase. We do not yet know how the voting went at the March meeting but the doves appear to have won the battle for another month.

I would suggest those MPC members who have stood firm in resisting calls for an increase but who are now maybe considering changing their view will want to see the next set of inflation reports before committing themselves. Any decision to increase base rates could prove to be a make or break decision in terms of the impact that may have on the wider UK economy and on consumer confidence.

The hawks on the committee have been arguing for a rate rise to put a brake on runaway inflation and present the argument that failure to take action now will result in more draconian action required later. The doves on the other hand paint the picture, not unrealistically that a rise now will strangle economic growth, the fourth quarter figures for 2010 show just how fragile the economy has been with GDP once again going negative.

The reality may also be that if inflation is imported (as it is argued) through higher material costs, oil and fuel in particular, raising rates will do nothing to curb inflation as these factors are outside our control.

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