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November 17, 2010    

Bank minutes reveal another three-way split

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by Kay Murchie

Minutes of the Bank of England’s November meeting have been released today and have revealed that the Monetary Policy Committee (MPC) were split three ways - for the second consecutive month.

Adam Posen, again, called for an injection of £50 billion via the Bank’s quantitative easing (QE) programme to boost the economy.

Furthermore, for the sixth consecutive month, policymaker Andrew Sentance voted for interest rates to be lifted from their current historic low of 0.5% to combat stubbornly high inflation.

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

Official figures yesterday revealed Consumer Price Inflation (CPI) rose to an annual rate of 3.2% in October, up from 3.1% in September.

The latest figure represents the eleventh consecutive month that inflation has been above the target of 2% and forced the Governor of the Bank of England, Mervyn King, to write a letter to Chancellor George Osborne (his fourth this year) to explain why inflation remains above target.

Mr King has already noted that inflation has remained more persistent than it had expected but a hike in interest rates is not required at this time.

However, Mr Sentance has previously warned that the Bank faces losing its credibility if it is not seen to be fighting inflation.

Today’s minutes, though, suggest that monetary policy will remain on hold - for the short-term at least, until the outlook for the economy becomes clearer.

The next MPC meeting is scheduled for 8-9 December with the minutes to be published on 22 December.

The pound gained more than 0.1% to $1.5933 following the release of the minutes, while other figures this morning revealed UK unemployment dipped slightly in the three months to September, while the claimant count also unexpectedly fell last month.

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