Bank of England in 7-2 vote to hold rates

Seven members voted to keep rates at 0.5%, while two voted for a hike to 0.75%.

(EPA)

More rate-setters at the Bank of England could be ready to switch sides and vote in favour of an interest rate hike, according to minutes of the latest policy meeting.

The record of the monetary policy committee’s November meeting showed two of its nine members — Ian McCafferty and Martin Weale — maintaining their vote for a quarter-point rise to 0.75 per cent.

But more significantly, there is now a “material spread” of views among the seven-strong no-change bloc over future risks.

Some worry growth will falter and the cost of living remain below the Bank’s 2 per cent target for far longer than expected, but others fear an inflation risk if rates are held at record lows for another year as slack in the economy is used up.

The hawkish signal from the minutes was at odds with the Bank’s inflation report forecasts last week, which effectively endorsed market expectations that interest rates will not start to climb until next October. Governor Mark Carney also stressed recovery risks such as the “spectre” of eurozone stagnation.

Capital Economics’ senior UK economist Samuel Tombs said the consensus in the no-change camp was “fraying at the edges”.

He said: “The minutes of the meeting strike a more-balanced tone than last week’s inflation report and signal that it might not take much positive news for some other members to join the two already voting to raise interest rates.”

Likely switchers could include deputy Governor Ben Broadbent, who refused to back the MPC’s last round of money-printing in July 2012.

The hawks worry about rapidly falling unemployment — currently 6 per cent — sharply feeding into wages, but the majority of the MPC have focused on the benign inflation outlook as oil and food prices sink.

Currency markets took the minutes hawkishly, pushing the pound up more than half a cent against the dollar, although other experts added that a first rate rise since 2007 still looked off the cards until after the general election.