The governor of the Bank of England, Mervyn King, was among the four who voted in favour of raising the Base Rate rise, along with deputy governor John Gieve, and committee members Tim Besley and Andrew Sentance.
The majority of five who voted for a Base Rate hold included the second deputy governor, Rachel Lomax.
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The dissenting group argued an immediate rise was required to temper the risks of a rise in inflation. The May Inflation Report had warned of these risks and the projection for interest rates has factored in another Base Rate rise for the year. According to the minutes, those who wished an increase saw ‘no compelling reason to wait’.
It was added that an increase now could help peak interest rates at a lower level. The economy continues to grow robustly despite the four Base Rate increases since August 2006, while oil price increases have pushed the Consumer Price Index into an unexpected upward swing in the near term.
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The June Base Rate decision was widely tipped to remain at 5.50 per cent and such a close vote has taken many in the industry by surprise.
Ray Boulger, senior technical manager at John Charcol, commented: “The market was expecting a vote of 7-2 or 6-3, so it was closer than expected. It’s notable that King was on the losing side and he clearly wanted to make a statement. Charles Bean, the Bank’s chief economist and a man of a similar temperament to King, voted for no change in rate, which shows you just how close a call it was. This clearly ups the ante and I believe we will get a Base Rate increase in July.”
