Interest rate rises in the balance
Wednesday, 21 February 2007 12:00
The Bank of England was split on whether to raise interest rates or not earlier this month, minutes of the Monetary Policy Committee's (MPC's) February meeting reveal.
The interest rate setting committee voted 7-2 in favour of a freeze in interest rates in February, but with two members voting for a rise the future looks less than certain.
"The market expectation was for at least one more increase in Bank rate," the MPC minutes state.
But the majority of the MPC was content to wait and see the impact of three quick-fire rises in interest rates before moving base rate again.
"It would take some time for the full effects of the past tightening to be seen. It was difficult to judge whether, and if so by how much, policy might need to be further tightened to keep inflation on track to meet the target," the minutes add.
The Bank has increased interest rates three times between August and January - from 4.5 per cent to 5.25 per cent - seeing the cost of mortgages and loans soar.
But with inflation - which the MPC tries to control by raising and lowering the UK's underlying cost of borrowing - still running well ahead of the government's two per cent target, more rises in base rate could be on the way.
And the call to raise rates again was led by the MPC's two newest members - Tim Besley and Andrew Sentance.
These two have been the most aggressive in calling for a rate rise since joining the committee in September and October respectively.
February was the fourth time in five months they have both voted for a rise in interest rates, and the second time they have been the only people calling for one.
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