Lone voice on MPC calls for bank rate rise
Share
A member of the Bank of England’s monetary policy committee voted for bank rate to rise last month, the first call for a rate rise since August 2008.
Minutes from the MPC meeting earlier last month show Andrew Sentance voted to raise bank rate by 0.25 per cent.
The other members voted to keep rates on hold. Bank rate has been at the record low of 0.5 per cent since March 2009. The minutes reveal some members had concerns over whether the consumer price index measure of inflation would return to its 2 per cent target in the medium term.
In the emergency Budget, Chancellor George Osborne pledged to continue to target inflation at 2 per cent but warned that inflation will reach 2.7 per cent by the end of the year.
CPI inflation fell to 3.4 per cent in May from 3.7 per cent in April while the retail prices index rose by 5.1 per cent in May from 5.4 per cent in April.
The minutes also show one unnamed MPC member thought now was the right time to begin to withdraw from the bank’s £200bn quantitative easing programme, given the continued above-target rate of inflation.
But other members felt uncertainty over the Budget meant there was no need to change monetary policy this month.
John Charcol senior technical manager Ray Boulger says: “I still think it is unlikely we will see a bank rate rise this year and I think Andrew Sentance will remain a lone voice for some time. Tax rises announced in the Budget will have a similar impact to interest rate rises in that they mean consumers will have less disposable income to spend. This means there will be less of a need for the MPC to raise base rate for the time being.”
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
