New King on the block

10 July 2003

Mervyn King’s first session as head of Britain’s Monetary Policy Committee has delivered a rate cut that some see as overdue. That the new governor can start his term of office with such a popular move is surely great good luck for him.

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The Bank of England's Monetary Policy Committee has cut the Bank's repo rate by a quarter of a per cent, to 3.5%. Explaining its decision, the MPC said that the prospect for external demand for UK output was weaker than previously expected. It also noted that " Although RPIX inflation [retail prices less the effect of mortgage payments] is currently above the 2.5% target, this is the result of temporary factors which are expected to unwind in the coming months."

This is the first move in UK interest rates since February, when rates were cut from 4% to 4.75%. In June, six of nine members of the MPC voted to keep rates unchanged, including all five Bank officials present.

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