Bank expected to sanction November rate rise
Interest rates look set to rise next month with the news that the Bank of England Monetary Policy Committee narrowly voted five to four in favour of maintaining rates at 3.5 per cent.
Minutes from the MPC meeting show that the vote was far tighter than expected, with a majority of one agreeing to keep the cost of borrowing at its current 48-year low.
If agreed next month, any rise would be the first since 2000. Supporters of the raise claim that it is essential to ensuring inflation remains on track to hit its 2.5 per cent target.
Four members of the committee – deputy governor Andrew Large, Kate Barker, Stephen Nickell and executive director Paul Tucker – argued that improved economic conditions mean it is now appropriate to reverse July’s 0.25 per cent rate cut.
Analysts have become increasingly concerned about recent rises in consumer debt and the new governor of the Bank of England, Mervyn King, has also cautioned against excessive borrowing.
The committee meets in early November to assess interest rates again. The decision will be taken after the Bank’s quarterly inflation report is released.
The minutes of the October 9th meeting state: “A premature rise in the rate might choke off the improvement in business conditions.”
“Further consideration of the complex questions raised by the revised UK data during the coming forecast round would help to clarify some important issues,” the MPC adds.
