Three members of the Bank of England’s monetary policy committee voted to increase interest rates in February, raising the likelihood of a rise this month.
Minutes from February’s MPC meeting reveal that Spencer Dale joined Andrew Sentance and Martin Weale in calling for a rise in bank rate.
Sentance, who has been calling for a rise in interest rates since last June, voted for an increase of 0.5 per cent.
Dale and Weale wanted to raise the bank rate by 0.25 per cent while the remaining six committee members voted to hold rates at 0.5 per cent.
The minutes also reveal that Adam Posen continued in his call to boost the bank’s quantitative easing programme by £50bn to £250bn.
The minutes say: “For three members, the case for removing some monetary stimulus at this meeting was compelling. Of those members not favouring a rise in bank rate, some thought that the case for an increase had never- theless grown in strength.”
Economists believe the minutes point to an interest rate rise sooner rather than later. Henderson Global Investors economist Simon Ward says: “The MPC’s hawkish shift in February has pushed our forecasting model further in favour of a quarter-point hike in March. There is still a chance that this prediction will be reversed if consumer data, the Q4 GDP revision and purchasing managers’ surveys for February are weak.”
Centre for Economics and Business Research economist Shehan Mohamed says: “February’s minutes provide evidence that interest rates could rise as early as next month and may reach 1 per cent by the end of 2011.
“The recovery still remains fragile. A move towards a fast and pronounced tightening of monetary policy could damage the UK’s overall capacity to grow.”