The MPC’s decision to hold rates at 5 per cent was backed by seven members of the committee, with one member voting for a rise and one for a cut in the base rate.
Tim Besley wanted to increase interest rates by 0.25 per cent so as to send a strong message about the committee’s intention to curb inflation.
The MPC’s minutes show that while Besley acknowledged the impact of the energy shock and credit crunch, he felt an immediate increase in the base rate was needed to keep medium-term inflation expectations anchored and ensure the committee’s credibility in light of the current and prospective increase in CPI inflation.
David Blanchflower voted for a 0.25 per cent cut in the base rate in order to avoid inflation undershooting the target in the medium term.
The majority of members judged that the risks to inflation in the medium term were most likely to be balanced by maintaining the base rate at 5 per cent this month.