Bank voted 7-1 to hold rates in July

Minutes of the Bank of England’s July meeting have been released today and have revealed that the Monetary Policy Committee (MPC) voted 7-1 earlier this month to keep interest rates at the historic low of 0.5% – where they have been since March 2009.

Again, the usual nine-strong committee comprised of only eight members as Kate Barker’s term ended on 31 May. She will be replaced by Martin Weale, who will join the panel in time for the August meeting.

For the second consecutive month, the decision was not unanimous after policymaker Andrew Sentance voted for interest rates to rise by 0.25 percentage points.

Mr Sentance’s view to raise rates comes as inflation remains stubbornly high. The latest official data shows that British annual consumer price inflation (CPI) eased to 3.2% in June – down from 3.5% in May – however, the rate was higher than economists had expected and still exceeds the 2% target.

The CPI inflation rate is a benchmark for the MPC but the Committee continues to keep UK interest rates on hold at the historically low level and Mr Sentance continues to question how long interest rates can remain at this historically low level.

Speaking to BBC Radio in an interview broadcast at the weekend, Mr Sentance said: “The question we are now facing is, with the economy recovering and with the inflation having been higher than we expected, whether we now need to begin to move (rates) upwards again.”

He continued: “If we can raise interest rates in a gradual way that will be helpful for the recovery because it will mean that there won’t be big shocks.”

Meanwhile, the minutes of the July meeting said: “In the light of the news over the month, it seemed likely that growth would be weaker than previously expected but, at least for a while, inflation was likely to be higher.”

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