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MPC will leave UK rates unchanged

A recent Reuters poll showed that of the 60 economists questioned all believed that the Bank of England will retain UK base rates at 0.5% after the two-day meeting which will end on Thursday. If this is the case then it will be the 18th month in a row that UK base rates have remained at 0.5% and many actually believe it will be well into 2011 before we can even contemplate increasing UK base rates.

The government and the Bank of England are highly aware of the threat of inflation but they are also acutely aware of problems in the UK economy brought on by tax rises, budget cuts and general consumer concerns. Against this backdrop, and in direct comparison to strategies in a traditional boom and bust scenario, the government and the Bank of England cannot afford afforded to starve the UK economy of "cheap credit".

Despite the fact that a couple of members of the MPC have expressed their own individual concerns about inflation, and indeed there has been some fluctuations in voting patterns, we can almost take it for granted that there will be no movement in UK base rates during 2010.

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