Bank of England minutes show increasing fear of inflation
Monetary policy committee again split three ways amid concern over commodity prices and household inflation
Wednesday 22 December 2010
Policymakers at the Bank of England are growing increasingly concerned about the risk of inflation, according to the minutes of their latest meeting.
Details of December’s gathering of the Bank’s monetary policy committee showed a more hawkish tone over the rising cost of living – which has remained significantly above target through 2010.
The minutes also showed that the MPC was again split three ways over monetary policy. Andrew Sentance continued to push for a rise in interest rates to 0.75%, while Adam Posen again supported a £50bn expansion of the Bank’s £200bn quantitative easing programme. The remaining seven members voted for rates to remain at 0.5%, and to leave QE unchanged.
The meeting was held two weeks ago, against a backdrop of the eurozone debt crisis. The committee had also been privately briefed that inflation had risen again in November, with the consumer prices index hitting 3.3%.
According to the minutes, most members of the committee felt there is still enough spare capacity in the economy to pull inflation down in the medium term. However, there was also concern about commodity prices and rising household inflation expectations.
“Most of those members considered that the accumulation of news over recent months had probably shifted the balance of risks to inflation in the medium term upwards,” the minutes explained.