Bank of England getting closer to rate hike
The Bank of England edged closer to lifting interest rates earlier this month, minutes of the meeting revealed today, as the number of policymakers who voted in favour of a hike increased again.
Spencer Dale joined fellow monetary policy committee members Andrew Sentance and Martin Weale in voting to lift rates from their historic low of 0.5pc, despite a shock decline in the UK economy in the final three months of 2010.
The details of the meeting suggest the nine-strong committee, which was split three ways as Adam Posen reiterated his stance for a second bout of quantitative easing, was becoming increasingly divided after the inflation rate soared to 4pc in January.
The minutes, published a week after governor Mervyn King played down the prospect of lifting rates following the Bank's quarterly inflation forecast, revealed that some members who voted for no change in policy thought the case for a rate hike had "grown in strength".
The Bank's report last week confirmed inflation is expected to hit close to 5pc before falling to around the 2pc target in 2012, but this was based on market expectations for two or three rate rises this year.
But Mr King denied policymakers were paving the way for an early rate rise and said the path of monetary policy was not a foregone conclusion.
The minutes of February's meeting showed that Mr Sentance, who has voted in favour of a hike since the summer, now wants to see rates at 1pc, higher than his previous vote for an increase to 0.75pc.
Mr Weale, who voted for a hike for the first time in January's meeting, and Mr Dale want rates to increase to 0.75pc.
The minutes said the three hawks found the inflation threat, driven by rising global commodity prices, outweighed risks associated with the uncertainty surrounding the strength of the recovery.
Mr Sentance believes it is significantly more likely than not that inflation will overshoot the target in the medium term, the minutes said.
However, the majority who passed the 'no change' outcome decided there was merit in waiting to see how well the economy performed at the start of the year, to help assess whether the 0.5pc decline in GDP output in the fourth quarter was a one-off.
Economists said the current wait-and-see stance adopted by the majority of members meant an imminent rise in rates appeared less likely.
ING economist James Knightley said: "So far the data has bounced back from December's weather-related weakness, but with household spending constrained by negative real disposable incomes, falling house prices and constrained credit conditions, the prospect for growth remains poor."