Bank minutes reveal another three-way split in December
Minutes of the Bank of England’s December meeting have been released today and have revealed that the Monetary Policy Committee (MPC) were split three ways – for the third 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 seventh 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 remaining seven MPC members voted for policy to stay unchanged.
However, the minutes show the MPC is becoming concerned about rising medium-term inflation risks.
Last week, the Office for National Statistics (ONS) revealed Consumer Price Inflation (CPI) rose to an annual rate of 3.3% in November, up from 3.2% in October.
The figure represents the highest since May and inflation has now been above the target of 2% for a year.
However, Governor of the Bank of England, Mervyn King, has previously said inflation could reach 3.5% – due to the forthcoming VAT rise and expects inflation to fall below its target by early 2012.
Meanwhile, the minutes said the majority “stood ready to change the stance of policy should the balance of risks shift materially. Most of those members considered that the accumulation of news over recent months had probably shifted the balance of risks to inflation in the medium term upwards.”
The next MPC meeting is scheduled for 12-13 January 2011 with the minutes to be published on 26 January.
In related news today, the ONS revealed the UK economy grew by 0.7% in the July to September period – down from its previous estimate of 0.8%.
On an annual basis, meanwhile, growth was also revised down to 2.7% from 2.8%. Both figures surprised economists who had expected quarterly and annual growth to remain unchanged.
According to the ONS, the downward revision for quarter three was attributed to weaker growth in construction and business services and finance.