Cyrillic Partners

The Bank of England’s monetary policy committee voted to cut interest rates by 25 basis points on Thursday, to 5.5% from 5.75 percent.  It cited a decline in consumer spending, tighter credit and trouble in financial markets.

It’s the country’s first rate cut since 2005.

The European Central Bank kept its interest rates at 4%, ostensibly to fight inflation.

“The recent flurry of markedly softer data and survey evidence relating to the services sector, consumer confidence and the housing market has clearly raised fears within the monetary policy committee that there is an increased risk that growth could slow sharply over the coming months,” Howard Archer, chief UK and European economist with Global Insight–who correctly predicted the rate cut–told Forbes.com. Archer went on to tell Forbes.com that he expected the Bank of England to cut rates twice in the first half of 2008, taking them down to 5.0% by the middle of next year.

It’s a good example of why some European countries do not necessarily benefit from adopting the Euro and the dictates of the ECB. The organization tends to worry more about inflation and takes an economic strategy that favors the largest EU nations.

We recently wrote about Denmark and its renewed interest in dropping the Krone for the Euro.

Trackback URI | Comments RSS