MPC minutes show 5-4 vote
20 June 2007
20.06.2006
MPC MINUTES SHOW 5-4 VOTE
The minutes from the June 6th Meeting of the MPC showed today that the policy committee were split in the decision to leave rates on hold.
Mervyn King and three other members of the MPC voted for a back to back rise in interest rates.
The Bank of England Governor was joined by John Gieve, Tim Besley and Andrew Sentance in calling for the second consecutive rate rise in June.
The market had been expecting a 7-2 vote, and the close vote has raised expectations of a rate rise at the next meeting of the MPC.
The Dovish members argued that a decision to hike in June would have shocked the market and "Probably pushed the yield curve higher which would not be warranted"
They also argued that there was a need for "Measured Rate Rises" given the high level of personal debt.
The Hawks argued that nothing had materially changed since the inflation report and that "There was no compelling reason to wait, moreover, by raising now, the peak in interest rates could eventually be lower"
They also pointed out that almost every part of the country was still experiencing significant house price inflation and that the recent reduction in spending was at best tentative.
Sterling gained across the board after the release pushing up to a high of 1.9924 vs the USD and 1.4845 against the EUR.
It is likely to be a close call as to whether the MPC raise rate in July. If they are left on hold it is highly probably that they will be raised in August with the release of the next inflation report.
(Research Desk - Ben Parkinson)