Bank of England divide deepens over interest rates

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Division within the Bank of England on raising interest rates still shows no sign of healing ahead of next week’s decision on the issue, recent interviews with policymakers suggest.

Monetary policy committee member Michael Saunders argues the central bank should raise rates, according to the Times.

Saunders says the Bank is pushing the economy too hard with rates of 0.25 per cent and £375bn of quantitative easing.

Fellow MPC member Ian McCafferty agrees with Saunders, and both voted for a rise to 0.50 per cent at last month’s vote on interest rate levels.

But MPC member Gertjan Vlieghe is still in favour of keeping rates as they are, according to a recent interview.

He told The Independent: “This is an environment where a premature hike would be a bigger mistake than one that turns out to be slightly late.

“I think the consumption slowdown is here, it’s not over. I don’t think there’s going to be a sufficient offset from investment and net exports to compensate for that.”

Bank of England chief economist Andy Haldane says he may back higher rates, while governor Mark Carney has also hinted that a rise is needed.

The MPC will vote on whether or not to increase interest rates next week.