The minutes from the latest Monetary Policy Committee meeting on 9th and 10th February shows that the Bank's chief economist has now joined Andrew Sentance and Martin Weale in calling for the base rate to be increased.
The MPC voted overall to maintain the base rate at its historic low of 0.5% as well as keeping the size of the Asset Purchase Programme (quantitative easing) at £200 billion.
All nine members of the committee were present and voted as follows:
- The Governor of the BoE, Mervyn King – no change
- Deputy Governor (monetary policy), Charles Bean – no change
- Paul Tucker (financial stability) – no change
- Spencer Dale – 0.25% increase in rates no change to QE
- Paul Fisher – no change
- David Miles – no change
- Adam Posen – no change to base rate but increase QE by £50 billion
- Andrew Sentance – 0.5% increase in base rate, no change to QE
- Martin Weale – 0.25% increase in rates no change to QE
Andrew Sentance has been calling for a rate rise to stave off inflation since 10 June 2010. Martin Weale, who joined the committee in July 2010 sided with Sentance in his call to raise rates on 13th January 2011 and they were both then joined by Spencer Dale this month. Sentance had previously limited his call to raise rates to 0.25% but doubled it this month.
When Martin Weale joined the MPC it was expected that he would back Mervyn King's stance on low interest rates.
With inflation now running at about twice the MPC's remit of keeping it at 2%, this shift in voting may boost City expectations of an early increase in rates over the next few months.