Concerns about rising house prices in the UK mean the Bank of England will not cut rates today as earlier predicted, analysts claimed yesterday.
The bank's monetary policy committee will today decide whether to leave its key policy rate, the repo rate, at 4.5 per cent.
Poor retail sales performance in January caused expectations of a rate cut, following several increases in interest rates late last year. But a resumption in the growth of house prices has been taken as a signal the bank sees inflation risks as outweighing the risk of hurting demand.
"The Halifax's monthly house price survey will give the hawks sleepless nights, since average UK house prices are rising at a rate not seen since last May," said Niall Dunne, financial markets strategist with Ulster Bank.
Some analysts maintained future cuts were still in the offing. "A May cut is more likely than not, but the bank is likely to need to see ongoing signs of lower than expected targeted inflation as well as weaker than expected first-quarter GDP growth," said Alan Castle, economist with Lehman Brothers.
In Japan, the Bank of Japan may end its five-year policy of zero interest rates today. Yesterday, the Nikkei average declined almost 1 per cent as investors factored in tightening reaction by the bank to accelerating growth and inflation.
