Friday, 28 January 2011

The second interest rate domino falls

Just a few quick thoughts on the Bank of England Monetary Policy Committee minutes which were released a couple of days ago and can be read HERE. The interesting bit is of course that a second domino vote has fallen in favour of a rate rise, namely Martin Weale who, along with Andrew Sentence, is now lobbying for a 0.25 per cent increase in the rate.

The minutes read: “The continued elevated rate of inflation, which was forecast to persist, posed a significant risk to inflation expectations and hence to the medium-term outlook … this made more powerful the case which had been building for a gradual rise in Bank Rate.”

The balance has now therefore shifted in favour of a rise in rates by the middle of the year, which will take more money out of people’s pockets. I’ve blogged previously that it is inevitable that interest rates will increase over the medium term but it now looks as if that day is getting closer, even if we are still a few votes short.

The question is of course whether Mr Weale would have voted for a rise had he seen the economic data which came out earlier this week?


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