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Three MPC members vote for rate rise in February

Three members of the Monetary Policy Committee voted for a Bank base rate rise in February, minutes from the meeting reveal.

Spencer Dale joined Martin Weale in voting for a rise of 0.25% while rate rebel Andrew Sentence opted for a 0.5% rise.

All other six, including Bank of England governor Mervyn King, voted to hold the rate at 0.5% for the 23rd consecutive month.

Adam Posen was the only member to vote for an increase in quantitative easing from £200m to £250m.

But the minutes also shows that most members agreed that the case for tightening monetary policy had been strengethed due to the risks of inflation.

Sentence says there is mounting evidence that firms were able to pass on cost increases to the prices they set and noted also that nominal domestic demand had been growing for some time.

He told the MPC that it was significantly more likely than not that inflation would overshoot the inflation target in the medium term.

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  • John Fish 23rd February 2011 at 1:49 pm

    Well said Mr. Kingsley.
    Time for Mr. Sentance to depart.

  • Paul 23rd February 2011 at 12:46 pm

    “The inflation figure is not because of rampant consumerism, it is caused by speculators and currency issues in the oil market and by VAT rises.”

    The speculators’ leverage is being financed by low interest rates. Keep rates low, expect more speculation pushing prices up further. What good are low mortgage repayments when the saving is being taken away by the cost of food and oil? Remember, the price increases are fairly permanent (deflation anyone?), and will still be there when rates need to rise.

    Better to raise rates now before higher price inflation gets locked in.

  • William Kingsley 23rd February 2011 at 10:37 am

    I’m sure Mr Sentence has a lot of data to back up his case for such an increase and I agree that rates need to rise over time but one thing Mr Sentance doesn’t have is contact with real people who are having to cope incomes being squeezed more than ever before due to rising oil costs and VAT rises. Once these feed through it multiplies the inflation figures. The inflation figure is not because of rampant consumerism, it is caused by speculators and currency issues in the oil market and by VAT rises. If rates rise too far too soon it will cause more repossessions which will cause property prices to fall creating further problems for vulnerable people which we just don’t need right now.