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September MPC votes for unchanged interest rates

Over the last few months we have seen a three way split in the Bank of England MPC - which sets the base rate for the UK - although the minutes for September's meeting now show a change in attitude. The vote was 8 - 1 in favour of retaining the current level of interest rates with the one committee member who had been looking for a rise now back in the no-change camp. So what next for UK base rates?

It has to be appreciated that this meeting took place well before the turmoil of recent days and while nobody is expecting an imminent change in rates there are growing calls for an immediate cut to help boost the economy and reduce the cost of borrowing. Even though the committee is not due to meet until October the Bank of England does have the power to intervene at any stage and cut rates as the committee members see fit. Will it happen?

There is a growing need for support and hope in the markets with the likes of HBOS suffering because of a frozen money market. Unable to borrow money to fund its everyday business and refinance just under £200 billion of loans the group is in trouble. While a reduction in rates would not immediately lead to substantially lower rates in the money markets it would at least restrict any more rises in the cost of borrowing in the short term.

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