Inflation fears led MPC to hold base rate

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Fears of uncertainty generated by the Greek debt crisis led the Bank of England’s Monetary Policy Committee to maintain the base rate this month.

Minutes from the MPC’s July meeting showed that “a number” of MPC members were concerned of the risk of inflation rising above the Bank’s 2 per cent target.

The Bank says: “For these members, the uncertainty caused by recent developments in Greece was a very material factor in their decisions: absent that uncertainty, the decision between holding Bank Rate at its current level versus a small increase was becoming more finely balanced.

“For most members, even before accounting for the recent increase in uncertainty in the external environment, the current stance of monetary policy remained appropriate to balance the risks of inflation around the target in the medium-term. For all members, the policy decision this month was clear-cut.”

Earlier this month, the MPC voted unanimously to maintain the base rate at 0.5 per cent as well as keeping quantitative easing at £375bn.

CPI figures showed the inflation dropped from 0.1% to 0% in May.