New Bank of England member votes to keep rates on hold

Ben Broadbent
Image caption Ben Broadbent appointment had introduced an unknown quantity into MPC decisions

A newly-joined member of the Bank of England's rate-setting committee has voted to keep rates on hold at 0.5%.

Minutes of its June meeting showed that former Goldman Sachs economist Ben Broadbent voted with the majority of the Monetary Policy Committee (MPC).

It means he has broken with the voting record of his more hawkish predecessor, Andrew Sentance, who had been backing a half-point rate rise since February.

Other members' votes were unchanged, giving a seven-to-two majority.

Rates have remained at a record low for 27 months.

Chris Williamson, chief economist at Markit said the minutes suggested they would stay at 0.5%, with any change more likely to be a further round of "quantitative easing" (QE) - more money being put into the economy - than a rate rise.

"Together with the more dovish composition of the MPC, this suggests the chances of interest rates rising this year have decreased and the chance of additional stimulus have risen," he said.

Double target

Despite the no-change majority, the minutes also showed the MPC was still worried about the rise in inflation.

Officials figures showed that consumer price inflation in May remained more than double the 2% target rate, at 4.5%.

Committee members said it remained likely that it would continue to rise - probably above 5% - before falling back again.

But they said there was little sign that higher inflation was leading to demands for higher wages.

Also weighing against an interest rate rise was the view by the MPC that there was evidence of a slowdown in the global economy, partly caused by the tsunami in Japan, which could affect the UK's recovery.

The minutes said setting interest rates involved a finely balanced judgement: "The medium-term outlook for demand remained extremely difficult to judge."

Hand revealed

Mr Broadbent was an "unknown quantity" when he was appointed, according to BBC economics editor Stephanie Flanders, with much speculation over which way he would vote.

But with his hand now revealed, the balance of the committee has swung back towards the doves.

It comes after two other members - Martin Weale and Spencer Dale - had switched to voting in favour of a rate rise earlier this year.

Both of them again backed a quarter-point rise at the latest meeting.

Meanwhile, the committee's most dovish member, Adam Posen, again was the only one actually to vote in favour of a £50bn increase in quantitative easing.

On Monday, another MPC member, Paul Fisher, warned that the Bank was still open to restarting its QE programme of buying up UK government bonds to pump more cash into the markets.

"I've said in the past it is still very much on the table as one of our potential policy actions, and it's certainly not ruled out and people need to be aware of that," he said.

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