MPC edging towards rate rise, minutes say

The Bank of England’s Monetary Policy Committee (MPC) appears to be edging closer to a rise in interest rates, according to its minutes for January.

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Martin Weale, a member of the MPC, joined colleague Andrew Sentance in voting for a 0.25 percentage point hike.

Adam Posen remained in favour of leaving rates on hold and increasing the Bank’s quantitative easing programme by a quarter, or £50 billion.

Six members voted to leave monetary policy unchanged.

The Bank says short-term inflation has exceeded its expectations. The latest figures put inflation at 3.7%. (article continues below)

But it did not change its majority medium-term view that economic headwinds and “spare capacity”, exacerbated by government spending cuts, would force inflation down over the medium term.

The MPC noted, however, that “a small increase in bank rate at this meeting would still leave monetary policy highly accommodative, and would not preclude the committee from increasing the policy stimulus in future if that became necessary.”