Bank voted 6-3 to increase rates

July 19, 2007 - 0:0

Policymakers at the Bank of England voted six to three to raise interest rates to 5.75 percent this month, the minutes of their latest meeting show.

The Monetary Policy Committee said there were no major signs of a slowdown in consumer spending or the housing market despite previous rate rises. Rates have risen five times in the past year as policymakers have tried to contain inflationary pressures. Inflation weakened last month to 2.4 percent but the fall was smaller than expected. ------------------------ Where next? Bank Governor Mervyn King was among six members to vote for a rise -- two of whom changed their mind since June's 5-4 decision to keep rates on hold. Many experts expect rates to rise again soon to 6 percent, potentially as early as 2 August when the MPC holds its next meeting. The MPC said the ""full effects"" of earlier rates rises ""had yet to be felt"", remarks likely to be interpreted as a sign they feel further action may be needed. Those voting against the rise argued that the impact of higher borrowing costs on consumers, particularly those saddled with large debts, needed to be taken into account. Consumer price rises have slowed since the early part of the year when inflation rose above 3 percent, forcing King to write to the Treasury to explain why. Despite this, inflation remains well above the government's 2 percent benchmark. High Street spending was stronger in June than in the two previous months but experts said this was fuelled by heavy discounting in the face of weaker demand and poor weather. One analyst said the split vote suggested the MPC may be reluctant to raise rates again soon. ""There is clearly some concern within the MPC that raising interest rates again in the near term at least could have an excessive dampening impact on the economy given increased debt levels,"" said Howard Archer, chief economist at Global Insight. (Source: BBC