The Bank of England’s Monetary Policy Committee voted unanimously to keep base rate at a record-low 0.5 per cent earlier this month despite a warning from governor Mark Carney that rates could rise sooner than expected.
Minutes from the MPC’s June meeting, which were published today, echoed previous warnings from the Bank that rates may have to rise sooner if they are to be increased gradually.
The minutes say: “The case for raising bank rate gradually and cautiously was reinforced by uncertainty over its likely impact on the economy, following the long period at 0.5 per cent, although it could be argued that the more gradual the intended rise in bank rate, the earlier it might be necessary to start tightening policy.
“If policy were tightened prematurely, however, that could be associated with considerable costs in terms of lost output.”
However, the MPC added that it would be “necessary to see more evidence of slack [in the economy] being absorbed” before it decides to increase the benchmark rate.
Last week, Carney hinted base rate could rise “sooner than markets currently expect”, causing swap rates to spike. This led brokers to predict mortgage rates would increase by an average of 0.25 per cent over the coming weeks.
The MPC were also united in wanting to keep the Bank’s programme of quantitative easing at £375bn.