Bank policymakers signal no rush to cut rates

By Matt Falloon

LONDON (Reuters) - Markets are expecting an interest rate cut soon, but hawkish messages from Bank of England policymakers this week suggest the central bank is in no mood to lower borrowing costs just yet.

The Bank has held rates steady at a six-year high of 5.75 percent throughout the onslaught of the credit crunch, choosing not to follow the U.S. Federal Reserve in easing monetary policy in an effort to prevent a sharp economic slowdown.

With oil trading near $100 a barrel and demand from rapidly-growing emerging economies driving up other commodity costs such as food and metals, British policymakers are wary of cutting rates without seeing clear signs of a slowdown.

"Our forecasts are that interest rates are going to be easing back in the next two years," Lomax told the Hull Daily Mail newspaper in comments published on Wednesday. "These are projections, but they are not promises."

"We are still gathering the first bits of evidence of a slowdown, rather than saying it's actually here."

Lomax -- normally regarded as one of the Monetary Policy Committee's more dovish members -- surprised economists by not joining well-established dove David Blanchflower in voting for a 25 basis point cut this month.

If Lomax is not comfortable cutting rates yet, there seems little chance that lower borrowing costs are on the cards next week, when the MPC meets to make its monthly policy decision.

SEVERE OIL SHOCK