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The immediate policy decision

35 Most members felt that there had been little news on balance over the month. Oil prices were higher than expected, and the AEI lower, but it was possible that movements in both would prove to be erratic. For this reason, the considerations underlying the immediate policy decision were similar to those the previous month, and for some members the position remained finely balanced. 36 On one view, the repo rate should be maintained at 6% this month. Various arguments were identified for so doing, to which different members attached different weights. First, there were now more signs that domestic demand growth in general, and consumption growth in particular, might indeed be moderating in line with the central projection in the August Inflation Report. Housing wealth and nominal earnings were both slowing rather faster than assumed there; most other housing market indicators (such as secured lending, net reservations and particulars delivered) were consistent with such a slowdown, as were retail sales, although the corporate borrowing figures were a puzzle. Second, higher oil prices would tend to raise RPIX inflation in the short term, but it was questionable whether policy should react to any pick-up in inflation which was due solely to higher oil prices, particularly in the present conjuncture where this was likely to push RPIX inflation closer to target. In the longer term the oil price might fall back in line with market expectations, and if it did not it would tend to dampen domestic demand both here and abroad. Third, the prospects for the world economy might now be a little less buoyant than had been the case a month ago. Fourth, the latest figures for quantities and prices in the labour market ­ while very far from conclusive ­ suggested to some members that the rate of unemployment at which inflation tended to increase might have fallen, or at any rate that this was sufficiently uncertain for rates to be left on hold while the recent pattern of continued employment growth and moderate wage pressure persisted. Fifth, not only had some measures of inflation come in lower than expected, but some survey-based measures of price pressures continued to fall. Sixth, a rise in rates now, at a time when the euro was weak, might strengthen the perceived link between sterling and the dollar in an unhelpful way. Seventh, for some there remained upside risks from higher import prices and buoyant growth in some parts of the economy. But given the present benign picture on earnings and retail price inflation there was still time to react to inflationary pressures later; the risks to waiting were not great.