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18 June 08 - Rates “Could Have Been Increased”
Rate-setters at the Bank of England considered hiking interest
rates this month to try to keep a lid on soaring inflation,
it has been revealed.
Minutes of the Bank's Monetary Policy Committee (MPC) showed
that some of its nine members felt recent upward price pressure
"had been sufficient to consider whether an immediate
rise in bank rate was warranted". Official data yesterday
showed the annual rate of inflation reached 3.3% in May.
But fears that an interest rate rise would prove "counter
productive" and impact on credit availability saw the
committee vote 8-1 to keep rates unchanged at 5%. One member
- David Blanchflower - voted for a cut.
The rise in the Consumer Prices Index revealed this week
triggered a letter from Bank of England Governor Mervyn
King to the Chancellor, in which he warned that inflation
could rise to at least 4% later this year - more than 2%
above the Government's target.
The minutes of the MPC meeting, which was held two weeks'
ago, said "if there were a serious threat to medium-term
inflation expectations then a pre-emptive rise in rates
would be appropriate. Delay would only increase the eventual
costs of bringing inflation back to target."
But there were a number of arguments against, the committee
decided, including one which suggested that medium-term
inflation expectations remained "anchored". They
also cited increasing evidence that credit constraints were
affecting the real economy.
News items supplied by SelectNews, produced by PA Business,
part of the group that owns The Press Association, the UK's
national news agency. Copyright (c) PA Business 2007.
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