Strategy & Operations » Governance » Monetary Policy Committee still split over interest rates

(Sharecast) The Bank of England’s interest rate setting committee, the MPC, was split three ways again this month, though a large majority still voted for no change in either the level of interest rates or the size of the current quantitative easing programme.

Seven of the Monetary Policy Committee members voted to keep UK base rates at 0.5 percent and QE at £200bn.

Andrew Sentance again wanted a quarter-point rise in interest rates while Adam Posen voted for an increase in the stimulus package to £250bn.

It is the second month in a row that the vote on the MPC has been split three ways, with the divisions this time exactly the same as in October.

Inflation dominated the discussions, with the MPC conceding that prices could rise more than expected.

“Some committee members were concerned that recent inflation outturns and the higher near-term profile meant that the risk to inflation expectations was somewhat greater than previously thought,” the minutes said.

But the majority of the committee concluded that the UK economy still has plenty of spare capacity and that “medium-term inflation expectations remained anchored”.

There were “differing views on the precise balance of risks to inflation in the medium term, but stood ready to adjust policy in either direction as necessary,” the minutes added.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “We see no reason to change our view that the Bank of England is most likely to keep interest rates down at 0.5 percent until at least late-2011.”


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