The Bank of England Monetary Policy Committee voted unanimously to raise interest rates earlier this month, although some members questioned whether the increase should have been greater than 0.5%.
In the minutes of the meeting, which was held on the 9 and 10 May, the MPC says it decided to increase interest rates by 0.25% to 5.5% in the light of the projections for May’s inflationary report.
However, some members questioned whether there was a case for raising the rate by 0.5% given the upside risks to inflation over the medium term and the buoyant outlook for growth and demand.
The minutes reveal that although the May inflation forecast implied a high probability of another rate rise later in the year, the MPC felt an increase of 0.5% in May would only have been justified if it was “reasonably confident” another rise would be needed soon.
It says the May inflation projection was similar to February’s although it noted there remained an “unusual degree of uncertainty about the outlook for inflation, particularly in the near term”.
The main risks included the impact of stronger demand growth on companies’ prices, the evolution of inflation expectations, prospects for energy and import prices and the degree of spare capacity in the economy.
However, it says while there might be less disinflationary pressure in the global economy, the volatile movements in oil and industrial metal prices make it more difficult to look further ahead to assess medium-term inflationary pressures.
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