	bank of england pressure holds base rates this week s bank of england resistance to strong market pressure for lower  rates succeeded in holding bank base rates at pct but at a cost of threatening the chancellor of the exchequer nigel lawson s policy stated at the end of the paris group of six meeting last month that he wanted to see sterling broadly stable about then prevailing levels market sources said since then the pound has risen to pct on its closing trade weighted index up from pct imediately after the paris meeting and up on the day today s peak at pct was its highest since august a treasury spokesman said lawson had said he neither wanted a substantial rise or fall in sterling the question is therefore how large a rise he is ready to see before acting paul temperton chief economist at merrill lynch europe ltd estimated that the government wanted to see the trade weighted index about pct even after this action over the last few weeks sterling s only just within striking distance of that range he said other analysts agree that the government probably has some broad target range around this area however they said lawson would be prepared to see the pound go higher at least in the short term despite the risk of a loss of export competitiveness and cheaper prices on imports if the bank of england keeps the  rates as they are what s to stop it going higher said john cox executive director of ebc amro bank ltd a major operator on the london foreign exchange market cox estimates that the bank of england has been active selling sterling over the past few days despite the lack of general market talk of such intervention and this has helped keep it below dlrs the pound rose to dlrs from yesterday and february the day after the paris meeting but cox says the government must be worried with sterling heading toward marks and would be very concerned if it holds around these levels he warned the bank may run the risk of missing the  rate boat if rates don t come down the market will say they ought to have come down and will sell sterling he said most dealers agree there is a good deal of hot money being invested in sterling money simply attracted by high overnight or one week rates which could flow out at equally short notice however the authorities will hope that at least a proportion of the buying reflects long term investment the last thing they want to do is reduce them rates and have to jack them back up again said richard jeffrey economist at brokerage house hoare govett ltd he said a half point cut would ensure continued support for sterling at least in the near term however most analysts are still looking for a full point about march budget day the bank must hold out until it sees the reaction to the budget said temperton the budget is widely forecast to be a vote winner in the run up to a general election the major factor behind current bullishness in the government bond and currency markets lawson wants to delay a cut in base rates until the budget he wants it to be crowned with the glory of an  rate cut said ian harwood economist at warburg securities the equities arm of mercury international group speculation a clearing bank might break ranks and lead the way lower were confounded today there was excitement a fall in the weekly treasury bill rate to pct from pct last friday might mean the bank had changed its mind this followed the imposition of penal lending rates of pct on the discount houses yesterday and was the lowest since base rates were at pct early last october however with this bill rate pertaining to three months money banking sources said the market could not take the cut as a guide to the bank s intentions on short term rates reuter 
