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Abbey questions MPC’s lack of rate rise warning

Abbey has questioned the Monetary Policy Committees decision to raise the base rate to 5.25% after it gave no warning in previous meetings.

Barry Naisbitt, chief economist at Abbey, says: “The timing of today’s increase in base rates by 0.25% to 5.25% was a big surprise.

Financial markets had been expecting a rise in February although even that was not certain.

“Last month’s MPC minutes gave no hint of a desire on the part of the MPC to act so quickly.

“Markets will be waiting to see the MPC minutes for this month to understand the precise reasoning behind the timing of the move.

“Following the voting in November, this month would almost certainly have seen a split vote, but reports of higher pay settlements and strong service sector activity together with CPI inflation having hit 2.7% swung the balance in favour of an early increase.

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