MPC still split 6-3 over rate rise
The Monetary Policy Committee (MPC) remained split 6-3 against a rate rise for the second month, with opinion divided on how to tackle soaring inflation without snuffing out growth.
Spencer Dale and Martin Weale repeated their calls to immediately increase the Bank Rate by 25 basis points. Andrew Sentance again argued for a 0.5% rise, according to the March meeting minutes published today.
Governor Mervyn King, deputy Paul Tucker and four other members voted to hold rates at their historic low of 0.5% in a repeat of the previous month’s decision.
Meanwhile, eight members of the MPC again opted to maintain QE at £200bn, with Adam Posen calling for it to be increased by a further £50bn.
The continued division within the MPC over how best to curb rising inflation – which jumped a further 0.4% to 4.4% in February – while encourgaing growth comes ahead of the Budget later today.
Office for National Statistics (ONS) figures show the UK Consumer Prices Index (CPI) annual rate of inflation rose to 4.4%, up from 4% in January and more than double the Bank’s target of 2%.
The Retail Price Index (RPI), measuring the cost of high street prices on goods such as fuel and clothes pushed up to 5.5% from 5.1% in January.
A rate rise would dampen inflation but could also derail growth.
Governor Mervyn King said soaring oil prices are to blame for the jump in the cost of living, and argues a rate rise would have no effect on this and other external factors, the minutes note.
Chancellor George Osborne will today seek to reassure the country Britain is fully on the path to a sustainable recovery in what is being dubbed his ‘Budget for Growth’.