BoE rate-setters have fears for UK economy
Bank of England policymakers fear the shock decline in the UK economy at the end of last year may not have been temporary as consumers have continued to tighten their belts.
March minutes of the Bank’s Monetary Policy Committee (MPC) meeting showed members who voted in favour of holding interest rates at their historic low of 0.5% were still minded to wait to see how the economy has fared in the first quarter of this year before altering their stance.
The voting position of the nine-strong committee remained unchanged this month with Andrew Sentance voting in favour of a 0.5% increase, Martin Weale and Spencer Dale backing a 0.25% rise and Adam Posen reiterating his vote for a second bout of quantitative easing. The remainder voted for no change in policy.
But the minutes – published the day after official figures revealed inflation hit 4.4% in February – showed that some members in the no-change camp found the case for a rate hike had strengthened in recent months.
The minutes also warned there was a significant risk that inflation would exceed 5% in the near term.
The MPC said: “While the recent information on the prospects for UK net trade had been encouraging, it was not yet clear that the weakness in output growth seen in the latter part of 2010 would prove temporary, particularly in light of the latest indicators of a further weakening in consumer spending.”
