MPC divided over rate rise, 2:7 for hike |
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Fri, 22 Apr 2005 01:00
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The Bank of England’s Monetary Policy Committee is divided over whether interest rate should be hiked. Two members of the MPC pushed for a rate rise by another 25 basis points at their meeting this month saying it would help keep inflationary pressures under control.
Deputy Governor Sir Andrew Large and executive director Paul Tucker were the two MPC members who favoured a rate rise. They were prompted by the slowdown in consumer spending which other members insisted was only temporary. This is the second time that Sir Large and Mr. Tucker had voted for a rate rise after last month. On both occasions they were outnumbered 2:7.
| The others members of the MPC who did not sanction an increase included governor Mervyn King who said that the rate policy did not require further tightening. Consequently, this is the eighth month that the rates have remained steady at 4.75%.
The 7 MPC members were confident that a healthy employment rate and good income growth would help consumer spending to recover from its current slow down. Although poor performance in the retail market noted last Christmas had continued during the first quarter this year with an even sharper decline, it was about the worst that it could get, they said.
In the minutes published yesterday, their positive outlook was based on the data which suggested that the overall risk to the inflation forecast continued to be on the downside. The MPC aims to maintain consumer price inflation at about 2%.
There currently appear to be fewer risks of sharp falls in housing market activity than before. Although the housing market appeared largely stagnant, the Council of Mortgage Lenders have reported that gross mortgage lending in March rose 13% above February’s borrowings to £20.1 billion.
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