Our MPC-ometer forecasts the Monetary Policy Committee vote each month based on a small number of economic and financial variables. The model suggests a 7-2 decision for unchanged rates at this week’s meeting (two votes for a 25 b.p. cut).

All 56 economists polled by Reuters last week expected rates to be held this month but 12 forecast a decline in November. Some of the doves are drawing a parallel with 1998, when the MPC raised rates in June but cut them in October, partly in response to a financial crisis. Further substantial reductions followed.

I think the comparison with 1998 is flawed for three reasons. First, the economy looks stronger now than then. GDP was estimated to have grown by only 0.5% in the first and second quarters of 1998, compared with 0.8% per quarter in the first half of this year.

Secondly, the 1998 financial crisis hit confidence hard. Business and consumer surveys weakened sharply and the stock market fell 25% from peak to trough. The latest surveys show a modest impact from recent turbulence, while the decline in stocks has been limited to 13%, with much of the ground subsequently recovered.

Thirdly, inflation risks look higher now, with businesses attempting to lift prices and broad money growth booming. The latest CBI industrial survey shows a balance of 16% of firms planning to hike prices, compared with 17% planning to cut in September 1998.

I am still inclined to think that rates are on hold until year-end, though will be guided by the MPC-ometer. Looking further ahead, the scope for reductions appears much more limited than in 1998-99.