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Three-way split in MPC again

The Monetary Policy Committee was once again split three ways in December, official minutes show.

Sentance argued that demand had continued to recover at home and abroad, and a wide range of measures of UK nominal demand had grown at above typical pre-recession rates.

He adds that the private sector expansion in the past year bodes well for coping with the government’s cuts programme.

He also warned that spare capacity in the UK economy was not pushing inflation downwards.

But Posen argues recent inflation outturns could be explained by the various price level shocks that had occurred and contained little news about inflation in the medium term.

He says there is a significant margin of spare capacity which will persist for some time and keep inflation down.

Richard Sexton, director of chartered surveyor e.surv, says any interest rate hikes must be rejected.

He says : “Threats to growth in the property and housing markets remain more serious than the dangers of higher inflation, and the MPC must act forcefully.  If the recovery shows signs of faltering, the MPC must stand ready to consider further QE in 2011.”

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