MPC split over rate decision

20 August 2008

Seven out of nine of the Bank’s MPC voted to hold the rate at 5%, while Timothy Besley voted to increase rates to 5.25%, and David Blanchflower voted for a cut to 4.75%.

The seven members that wanted to hold rates cited rising inflation as one of the reasons they wanted to keep rates on hold.

The BoE predicts rates will remain at 5% over the coming months, as it continues to balance risks to growth and inflation.

However the prevailing mood seems to suggest that Blanchflower will find a few more allies as we move towards the end of the year, as bad news on growth and employment continues to pile up.

It predicts the first rate cut will be in early 2009, with an outside chance of a cut before Christmas if it becomes clear that inflation is starting to turn the corner.