Minutes show split over rates decision

The Bank of England's Monetary Policy Committee split three ways when it met to set interest rates earlier this month. Although the MPC voted by 8 to 1 to keep rates on hold, the minutes of the meeting, published yesterday, suggested some members were keen to raise rates immediately to dampen inflationary pressures, though in the event they voted for no change.

External MPC member David Blanchflower voted for a rate cut for the ninth consecutive time. However, the minutes reveal that another faction felt that recent news on inflationary pressures "had been sufficient to consider whether an immediate rise was warranted. 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."

In the end, though, the great majority agreed that such a move might send too hawkish a signal.

Michael Hume, of Lehman Brothers, commented: "This month's upside surprises on inflation will probably be enough to persuade the hawkish members to vote for a hike at the July MPC meeting, resulting in a three-way split."

The MPC's task will have been made no easier by two surveys released yesterday. The CBI's review of manufacturing indicates that orders in the sector, accounting for less than a fifth of the economy, were relatively healthy, but prices were rising steeply. The Bank of England's Agents' Survey told a similar story and said the outlook for retail sales, service sector turnover, investment and employment have worsened once again.