Bank of England split on cost of borrowing increase

The Bank of England board who decide where to set interest rates were almost evenly split on whether to raise or reduce the cost of borrowing this month.

Notes of their deliberations published by the Monetary Policy Committee (MPC) show that members voted to both increase and cut rates in the same month for the first time since 1998.

Anticipation of a possible rate increase has already fed through to banks’ lending estimates and hit best rates, for instance the cost of fixed rate mortgages.

In the end, the MPC judged that it would be “sensible to wait for further evidence” before adjusting the base rate of interest either way.

One of the leading voices calling for a reduction in the cost of borrowing, Stephen Nickell, has now left the committee however, making a raise more likely.

Economic analyst Howard Archer of Global Insight said that the MPC was likely to approach any move cautiously, however.

“The minutes do not suggest that the majority of the MPC are itching to pull the interest rate trigger in the near term at least,” he said.

“The overall tone of the minutes are still relatively balanced, and there is clearly considerable uncertainty within the MPC over the growth and inflation outlook.”

© Adfero Ltd

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