Minutes from the MPC’s last meeting showed the split in opinion centred on whether there was enough evidence of the risk of inflation falling back to warrant a rise in rates.
Those who supported a rise said it was needed to check inflation. Dissenters argued the MPC should not react to short-term volatility in Consumer Price Index inflation and it would help to wait for the February Inflation Report to put it into context. This was the first time in two-and-half-years that rates rose in a month when the Inflation Report was not published.
Those who favoured the rise included the governor of the Bank of England, Mervyn King. Opposers included Charlie Bean, the chief economist of the Bank of England, which Ray Boulger, senior technical director at John Charcol, noted with interest, as he said Bank employees usually stuck together on their decision.
Boulger added: “King has said inflation is expected to fall in the latter part of 2007 and might fall quite significantly. This, combined with the minutes, make a rise in February less likely and more probable for March. What’s more important is whether rates peak at 5.50 per cent and I think we can be more optimistic that it will, or at the outside 5.75 per cent, though it’s a tough call.”
