King: Threat of inflation remains
30 Nov 07

Despite figures which show a slowing housing market, Mervyn King warned that the threat of inflation from higher commodity and energy prices remained serious, making the upcoming December rate decision very difficult to make.

Mortage approvals fell to their lowest level since early 2005. The Nationwide building society said that house price inflation from 9.7% in September to 6.9%, a drop of 0.6% in October. I had reported in another blog, that Nationwide predicted house price inflation to drop to 0% this time next year.

The financial markets and economists have put the chances of a December rate cut as 50-50. However, they still think that there will be successive rate cuts early next year.

If more signs appear to show the the wider economy is slowing down then the MPC will feel more at ease if they decide to cut rates pre-emptively in December.

Links:
Threat of inflation remains, says King - The FT (30 Nov 07)