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More Bank support for rate rise
2011-02-23 10:19:19
23 February 2011 Last updated at 13:09 Share this page Delicious Digg Facebook reddit StumbleUpon Twitter Email Print Three Bank of England policymakers vote for rate rise The bank's policymakers face a 'real dilemma' on rates its deputy governor said Continue reading the main story UK Economy UK economy tracker Q&A: What is inflation? Calculate your inflation rate Q&A: What is GDP?
Another Bank of England policymaker has voted for an interest rate rise - suggesting rates could be raised sooner rather than later.
Spencer Dale has joined Andrew Sentance and Martin Weale in backing a rise, minutes of February's Monetary Policy Committee (MPC) meeting show.
The remaining six MPC members voted to keep rates at historic 0.5% lows.
Worries are growing about the recent pick-up in inflation, boosted by rising commodity prices and the VAT increase.
The Consumer Prices Index rose at an annual rate of 4% in January, twice the Bank of England's official target.
Sterling climbed against the dollar after the MPC minutes were released, with the pound hitting $1.627, its highest level of 2011, as the prospect of a rate rise became more likely.
'Unwelcome'The extra support for a rate rise highlights the increasing disagreement among the MPC.
Mr Dale and Mr Weale voted to raise rates to 0.75% while Mr Sentance called for rates to increase to 1%.
Continue reading the main story “Start QuoteAbsent a major upward revision to that fourth quarter number for GDP on Friday, it's hard to see what could substantially strengthen the hawks' case between now and 9 March.”
End Quote Stephanie Flanders Economics editor, BBC News Read Stephanie's blog in fullAnd the minutes also suggested that those who had opposed a hike in rates this month would consider a change in stance if the UK's GDP figures suggested that the economy had picked up at the start of the year.
The initial data suggested GDP fell by 0.5% between October and December - though much of this was attributed to the impact of the snow and frozen weather at the end of the year.
Meanwhile MPC member, Adam Posen again voted to increase the programme of injecting money into the economy, known as quantitative easing, from £200bn to £250bn.
The British Chambers of Commerce said the apparent shift towards raising rates was "unwelcome" and that such a step, at a time when the government was slashing spending, "would increase the threat of derailing the recovery".
Continue reading the main story How members voted on interest rates* MPC Member Dec 2010 Jan 2011 Feb 2011Source: Bank of England
* Rate currently 0.5%
Mervyn King (Governor)
No change
No change
No change
Paul Tucker (Dep Governor)
No change
No change
No change
Charles Bean (Dep Governor)
No change
No change
No change
Spencer Dale
No change
No change
Raise to 0.75%
Paul Fisher
No change
No change
No change
David Miles
No change
No change
No change
Adam Posen
No change
No change
No change
Andrew Sentance
Raise to 0.75%
Raise to 0.75%
Raise to 1%
Martin Weale
No change
Raise to 0.75%
Raise to 0.75%
The increase in the VAT rate and higher fuel, energy and other commodity prices, which are largely due to international factors, would not be affected in the short term by rate rises, the BCC's chief economist David Kern added.
"Since there is no evidence that inflationary expectations are increasing and wage pressures are still modest, we believe that there is no need for the MPC to react immediately.
"While we accept that interest rates will have to increase later in the year, we believe the MPC should wait until the economy has absorbed the initial impact of the Government's deficit cutting plan."
'Delicate balance'
The Bank's deputy governor Paul Tucker made a rare public statement on monetary policy on Tuesday, saying the MPC faced a "real dilemma" over whether to raise interest rates in the next few months.
"Our job is to bring inflation back to the 2% target. That's going to take us a little while and it means that we face a real dilemma in what to do about interest rates over the next few months," Mr Tucker told BBC Radio Bristol.
"The question we face isn't to make a violent increase in interest rates, it's whether or not to take away just a little bit of the stimulus that we've been applying to the economy over the last few years. This is a delicate balance."
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