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Rate setters maintain their positions

Rate setters maintain their positions

Category: Economy

Updated: 20/07/2011
First Published: 20/07/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

A rise in interest rates still appears some way away after minutes from the Bank of England's latest rate setting meeting showed the voting remained unchanged on the previous month.

Seven members of the Monetary Policy Committee voted to keep rates unchanged, while two said they wanted rates to rise, the same pattern as in June.

Spencer Dale and Martin Weale remain in the minority with both wanting rates to rise by 0.25% to 0.75%.

Adam Posen was again a lone voice in wanting the Bank's programme of quantitative easing increased by £50 billion to give the economy a boost.

Explaining the reasons behind the decisions, the committee said that the economy had been weaker than expected and would persist for longer than originally anticipated.

The Centre for Economics and Business Research (cebr) said the surprise fall in inflation, from 4.5% in May to 4.2% in June, gives the Bank of England room for manoeuvre in keeping rates stable until the economic recovery gains a stronger foothold.

"Overall, we think the MPC's majority view on monetary policy is about right," said the think tank.

"With the Eurozone on the brink of a potential meltdown amidst the ongoing sovereign debt crisis, the possibility of another recession in the Western economies remains a distinct possibility.

"Tightening monetary policy against this background could prove a major policy error.

"A sharp weakening in the UK economic outlook could warrant further quantitative easing - we may actually see a further loosening in monetary policy before interest rates start rising again."

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