MPC deputy governor responsible for monetary policy Rachel Lomax was one of three committee members to vote against increasing bank rate to 5.75 per cent this month.
According to the minutes of the July meeting of the MPC, six members – including MPC governor Mervyn King and deputy governor John Gieve – voted in favour of increasing the bank rate by 25 basis points to 5.75 per cent.
The minutes show that a few members felt that waiting to see the August Inflation Report would provide a better platform for assessing the current stance of policy and the medium-term outlook for growth and inflation, and the associated risks.
But for the majority of members there was a strong case for an immediate rise in bank rate of 25 basis points.
The minutes show that the majority of members believed that any delay in raising bank rate this month would run the risk that rates would eventually have to go higher than otherwise would have been necessary, although no immediate judgementwas being made about the future path of rates.
The minutes show that there were a range of views about the weights to place on different factors.
The report says: “Corporate activity generally seemed to be buoyant, with strong growth in associated business and financial services. Money and credit growth had remained strong. Although there remained a risk of a slowdown in the housing market and in consumer spending, the data available for the second quarter had not suggested that this would be any greater than anticipated at the time of the May Inflation Report.”
The minutes note that the August Inflation Report will be a key mechanism for re-assessing the medium-term outlook and communicating the Committee’s view of the risks.
Propertyfinder.com chief executive Warren Bright says: “There is clearly dissension in the MPC ranks over the right level for interest rates. After five interest rate increases, members of the MPC recognised a ‘softening in the housing market’ which has not yet been fully reflected in data.
“Earnings growth and unemployment are also weaker than expected and the decision to raise rates this month was not as clean cut as many had thought. The full effects of five rate hikes on the housing market are still to be felt. The housing market is slowing in a controlled way, consumers are stretched enough and the MPC should give people and markets a chance to adjust to the July hike before acting again.”