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MPC considered a rate rise in August

The MPC minutes for August have been released and show that the members of the committee considered both an increase in UK base rates and a loosening of fiscal policy. Opinion is split within the MPC with regards to the future direction of the UK economy with a number of reports at the time suggesting the UK was picking up while consequently the opposite appears to be true. So what will happen in the short to medium term?

It is the threat of inflation which was the predominant reason for considering a 0.25% increase in UK base rates despite the fact that budget cuts and tax rises have yet to kick in. However, it is the very fact that a number of options, all very different, were considered which makes this situation very unique and very difficult for the MPC to get right. The truth is there is no right and no wrong answer to the current UK economic situation because you could argue for a loosening of fiscal policy and you could argue for an increase in UK base rates.

Slowly but surely the situation will become clearer, but at this moment in time it is difficult to know what the MPC will do next month.

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