Bank of England (AFP)
London: Bank of England policy maker Kristin Forbes voted for an interest-rate increase and some others indicated they may not be far behind her.
As the nine-member Monetary Policy Committee balances a desire to support growth against concern about a currency-fueled pickup in consumer prices, Forbes said the trade-off has shifted.
For her, the outlook for above-target inflation over the next three years, combined with few concrete signs of slower growth, warranted an immediate hike. The bank kept the benchmark interest rate at a record low 0.25 percent in an 8-1 vote and unanimously decided to leave the bond-purchase programs unchanged yesterday.
Economists expected no change in policy, though none predicted a split vote. Forbes supported a rate increase to 0.5 percent, and some of those in the majority said it wouldn’t take much more strength in inflation or growth for them to also shift their view.
“With inflation rising sharply, and only mixed evidence on slowing activity domestically, some members noted that would take relatively little further upside news on the prospects for activity or inflation for them to consider that a more immediate reduction in policy support might be warranted,” the BOE said in minutes of this month’s meeting.
“You see just a little bit of the mood music shifting,” said Chris Hare, an economist at Investec Securities in London and a former BOE official. “‘But I wouldn’t get too carried away.”
The vote split was the first since July, when one member favored an immediate interest-rate cut after Britain voted to leave the European Union. The bank eventually loosened policy in August. Most members this month said that the outlook for a “modest withdrawal” of stimulus over the three-year forecast period “remained appropriate.”
