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(CEP News) Frankfurt - On Wednesday, the Bank of England released the minutes of its July 9 and 10 Monetary Policy Committee meeting and reported that seven members of the MPC voted to keep the Bank Rate unchanged at 5.0%, while two members voted for a change in the rate.
The seven members who voted for a hold were Mervyn King, Charles Bean, John Gieve, Kate Barker, Spencer Dale, Andrew Sentance and Paul Tucker, while Tim Besley and David Blanchflower voted in favour of a change. "Tim Besley preferred an increase of 25 basis points, and David Blanchflower preferred a reduction of 25 basis points," the BOE report elaborated. During the rate decision meeting in July, the MPC highlighted upside risks to inflation expectations due to the increasing inflation rate in the UK. However, the MPC also noted that downside risks to economic growth stemming from weaker incomes and tightening credit conditions could lead to a fall in the inflation rate below target later on. The BOE report listed a number of reasons for keeping the Bank Rate at 5.0% that were discussed during the July meeting. "An increase in Bank Rate in the current circumstances, when confidence was low and the financial sector fragile, could impart a downward momentum to the economy that risked a significant undershoot of inflation in the medium term," the report said. The MPC had also decided that a rate hike would also come as a shock to markets, already weakened from current credit conditions. "Keeping (the) Bank Rate at 5.0% when the economy was slowing was arguably already sending a strong signal of the MPC's commitment to reducing inflation," the MPC added. While most members of the MPC felt that a Band Rate of 5.0% properly balanced the medium-term inflation risks, Besley felt that an increase in the bank rate was needed to keep inflation expectations anchored. Meanwhile, MPC member David Blanchflower voted to reduce the bank rate to avoid inflation coming below the target level in the medium term. By Todd Wailoo,
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, edited by Nancy Girgis,
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