Only one of the nine-strong Bank of England Monetary Policy Committee voted to raise interest rates this month, despite the market having been evenly split on whether or not the central bank would hike.
Minutes of the April 7-8 MPC meeting published on Wednesday showed Deputy Governor Andrew Large had wanted an immediate quarter-point rate rise but was outgunned by the rest of the MPC who opted to leave rates steady at 4.0 percent.
Interest rate futures and gilts rose after the minutes were published as dealers had expected a tighter vote given the high uncertainty about what the BoE would do before the decision a fortnight ago.
Still, most of the MPC argued that with the economy still growing above trend and with little spare capacity, it would be appropriate to raise interest rates "in due course", noting that the two rate hikes since November had not had much impact on consumer spending or confidence.
But they said that so far it did not appear necessary to raise rates any faster than had been implied by the market yield curve shown in the February Inflation Report.
"The February projection on the market interest rate assumption had suggested that inflation would undershoot its target at the two-year horizon, and would be unlikely to exceed it by a significant amount further out," the minutes said.
Members were also worried by the continuing strength of the exchange rate which offset the inflationary impact of the strong house price growth. They said that the pound had not fallen back toward its level at the start of the year and so warranted more weight this month than in March.
The MPC also identified several arguments for a rate rise this month, notably that higher borrowing costs now might "help to discourage unsustainable rates of house price inflation".
"That would address an upside risk to consumption in the near term and also reduce the risk of a sharp correction to the housing market and to consumption later," the minutes said.
Comments
Comments are closed.