New Star's Simon Ward's MPC-ometer suggests MPC will vote for interest rate cut this week, but it will be close

"My MPC-ometer forecasts an “average interest rate decision” of -14 bp at this week’s MPC meeting. This is below the -12.5 bp threshold for action and suggests a 5-4 split in favour of a quarter-point cut.

As readers of my blog (www.moneymovesmarkets.com) will know, the story is that activity indicators are firmly in rate-cutting territory but are being offset by the highest household and business inflation expectations since the MPC's inception.

A quarter-point reduction is expected by the overwhelming majority of economists. Interestingly, the Sunday Times Shadow MPC also voted 5-4 to cut.

Could the MPC surprise with a no change decision? In theory, the MPC-ometer’s -14 bp forecast would be consistent with five votes for unchanged, three votes for a quarter-point cut and one vote (presumably by David Blanchflower) for half a point. However, three-way splits on the MPC are rare (the last one occurred in May 2006), so I have discounted this possibility."

For further comment from Simon Ward please contact Trina Arthur on 020 7225 9574 or Polhill Communications on 020 7655 0540.  For regular updates from Simon Ward log on to his blog: www.moneymovesmarkets.com

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