Mervyn King, governor of the Bank of England, voted for interest rates to rise 25 basis points in June, the minutes from this month’s Monetary Policy Committee meeting reveal.
Although the majority of the MPC voted to hold the base rate at 5.5%, King, deputy governor John Gieve, Tim Besley and Andrew Sentance voted to increase it to 5.75%.
They were outvoted by the remaining five members of the MPC – deputy governor Rachel Lomax, Kate Barker, Charles Bean, David Blanchflower and Paul Tucker.
This was the first time since August 2005 that King has been on the losing side of an MPC decision.
During the meeting, members ag-reed that two further 25 basis point rises in the base rate by the end of the year appear to have been priced into money market interest rates.
The minutes show that members who were for a rate rise felt there was no compelling reason to wait and that any increase would not spook the money markets because it had been widely anticipated. However, those who voted for the hold thought that the money market interest rate rises in Mayand early June were tightening monetary conditions.
Hiking the base rate could shock the money market and push rates even higher, a move they considered to be unwarranted.
Andrew Gall, business economist at the Building Societies Association, says it is no secret that King believes rates need to increase further and that his casting vote in July is also likely to back further increases.
Gall adds: “The members who voted to hold rates didn’t want to shock the money markets, which might have in-terpreted two rate rises in successive months as excessive.
“They believe rates need to rise – they just didn’t believe they needed to this month.”