Members of the Bank of England's Monetary Policy Committee (MPC) voted 7 to 1 in favour of keeping the base rate at 4.5% for the eighth month in a row, according to the minutes of the latest meeting.
At the meeting held at the beginning of this month, Stephen Nickell was once again the only person to vote for a 25 basis point reduction, claiming consumption growth was unlikely to pick up as permanent income would be damaged by higher energy prices and the rising effective tax rate.
He also suggested there was no evidence of any second round price impact from higher energy prices, meaning inflation was likely to fall modestly below the target as the first round effects began to drop out of the annual rate of change.
However, Nickell, who finishes his six year stint at the MPC at the end of May, was outvoted by the remaining members of the Committee including the Governor of the Bank of England, Mervyn King, and deputy governors Rachel Lomax and John Gieve, leaving the rate at 4.5%, unchanged since 4th August 2005.
The Committee said overall it agreed there had been little news on the month, with the majority of members saying the data suggested recent output growth had continued to grow at or around the trend rate, although some members did express concerns there remained a small downside risk to the near-term outlook.
But the minutes reveal the Committee believe “inflation was likely to remain close to target with some upside risks in the near term related to recent increases in energy prices”, adding “in the light of those considerations it was appropriate to leave the repo rate unchanged this month”.
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