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MPC minutes reveal concerns on timing

The Bank of England’s monetary policy committee’s deputy governor and chief economist were among the members who opposed this month’s base rate rise to 5.75 per cent.

Minutes from the meeting reveal that three of the nine committee members voted against the rise.

They included deputy governor responsible for monetary policy Rachel Lomax and chief economist Charles Bean, who argued that the impact of recent interest rate rises had yet to be felt. The latest 0.25 per cent rise was the fourth since last August.

Lomax and Bean warned that uncertainty over the impact of higher interest rates, especially given the high level of household debt, favoured a gradual approach to any further tightening. They felt August’s inflation report would provide a better platform for assessing policy.

Lomax said it was possible that demand would start to slow, “possibly quite sharply”.

But most members, including Bank of England governor Mervyn King, believed that delaying any increase would risk rates eventually having to rise higher than would otherwise have been necessary. chief executive Warren Bright says: “There is clearly dissension in the monetary policy committee’s 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.”


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