Three policy members again vote for interest rate rise
Minutes of the Bank of England’s March 9-10 meeting have been released today and have revealed the Monetary Policy Committee (MPC) again voted 6-3 to lift interest rates and 8-1 to restart the Bank’s quantitative easing (QE) scheme.
Adam Posen, again, called for an injection of £50 billion via the QE scheme to boost the economy.
For the second consecutive month, three policy members voted for an interest rate rise to combat stubbornly high inflation.
Andrew Sentance voted for a rise to 1%, while Martin Weale and Spencer Dale voted for a rise to 0.75%.
Mr Sentance has, since last June, voted for the base rate to be lifted.
Yesterday, the Office for National Statistics (ONS) announced Consumer Price Inflation (CPI) rose to an annual rate of 4.4% in February – the highest rate since October 2008.
The latest figures mean inflation is still way above the target of 2% – where it has been for more than a year and exceeded economists expectations of a rise to 4.2%.
The CPI inflation rate is a benchmark for the MPC but interest rates have been at the record low of 0.5% since March 2009.
However, while some analysts are growing concerned for soaring inflation and urging the central bank to hike rates, some business groups are suggesting a premature interest rate hike could derail the economic recovery.
Meanwhile, the minutes said there were “differences of view” on the “risks associated with an increase in inflation expectations materialising.”
“Some thought that this risk remained limited given that the near term outlook for inflation could be explained by reference to changes in energy and other commodity prices, VAT and the sterling exchange rate.”
In its latest quarterly forecasts, the Bank’s central projection was for inflation to peak at 4.5% in the third quarter of 2011.