The Bank of England held monetary policy steady as expected today, in a decision which may well conceal a more vigorous debate and a three-way split over how to respond to a highly uncertain economic outlook.
The central bank's monetary policy committee kept interest rates at a record low 0.5 for a 20th consecutive month, and announced no expansion to the £200 billion of financial assets bought between March 2009 and January this year.
Sterling hit an eight-month high against the dollar on the news, after the outside risk that the BoE might follow in the Bank of Japan's footsteps earlier this week and announce more quantitative easing did not materialise.
The much-anticipated decision to keep interest rates steady came as figures this morning showed that British house prices plunged a record 3.6 per cent on the month in September, in a further sign the British housing market is rapidly losing steam after a pick-up last year.
House prices in Britain plunged a record 3.6 percent in September, according to mortgage lender Halifax, and consumer confidence has weakened in the run-up to the government's Oct. 20 public spending review which will detail the toughest austerity
drive since World War Two. (Additional reporting by Christina Fincher and Fiona Shaikh, editing by Mike Peacock)
Analysts were cautious about reading too much into one month's data but noted that recent mortgage approvals data had also pointed to a weakening market and that fragile economic conditions meant the outlook was bleak.
However, the figures did little to alter the view the Bank of England will leave interest rates steady at 0.5 per cent and the stock of its quantitative easing purchases on hold at £200 billion when its monthly meeting concludes this morning.
Halifax said September's fall was the biggest since records began in 1983 and left house prices up 2.6 per cent in the three months compared with a year ago.
In August, Halifax said house prices rose 0.4 per cent on the month, for a three-month annual rate of 4.6 per cent.
Analysts said September's surprisingly weak reading could just be a blip, especially as rival mortgage lender Nationwide reported last week that house prices rose 0.1 per cent last month.
Halifax economist Martin Ellis said it was too early to tell whether September's decline marked the start of a steep downward trend in prices.
He said the quarterly figures provided a better picture of the underlying trend, showing house prices were 0.9 per cent down in the three months to September compared with the second quarter of this year.
"This rate of decline is significantly slower than the quarterly changes of between 5 and 6 per cent that were seen in the second half of 2008," Mr Ellis said. "It is therefore far too early to conclude that September's monthly fall is the beginning of a sustained period of declining house prices."
REUTERS