Concerns about the impact of soaring energy prices stopped more members of the Bank of England's Monetary Policy Committee from voting for a cut at its rate-setting meeting this month, it emerged yesterday.
For the fifth month in a row, Stephen Nickell, the university professor who leaves the committee next month, was the lone dove voting for interest rates to fall below 4.5 per cent.
None of the MPC's other seven members shared Mr Nickell's view that spare capacity in the economy and a lack of so-called "second-round" effects from higher energy prices meant inflation was likely to fall below the Bank's 2 per cent target. Indeed, the committee was split about the degree of spare capacity in the economy, which is a useful indicator of potential inflationary pressures.
Economists said the minutes showed the MPC was in no hurry to move interest rates in either direction. Gavin Redknap, at Standard Chartered Bank, said: "Notable for its absence this time was any particular concern over the consumer sector, with the Bank saying instead that asset prices should support demand going forward.
"That in itself is quite a departure from recent MPC meets, and suggests that the hawks within the Bank now have the upper hand."
The minutes of the meeting showed that Mr Nickell aside, the committee felt there were some "upside risks to inflation in the near term related to the recent increases in energy prices". This also increased the risk of overestimating the economy's supply capacity, they added.
There was also concern over the public's inflation expectations after research conducted for the Bank showed households think prices are rising at an annual rate of 2.8 per cent - higher than the actual 2 per cent.
The minutes said consumers' "inflation expectations had picked up in recent surveys and needed to be monitored carefully". The March reading for the consumer price index is out today.