Economists still expect interest rates to rise by next month even after the minutes of the last Monetary Policy Committee meeting show just one of the nine votes went in favour of a rise.
That lone vote, which was for a 25 basis points increase on the 4% UK base rate is expected to be heard early next month because of continued strong house price increases.
The minutes talk of a link between house price inflation and domestic consumption.
”Household spending seemed likely to remain buoyant in the near term, and might also be supported by the strength of the housing market,” the minutes state.
Yet at the same time, the MPC admits the strength of the connection between consumption and house prices is uncertain. If the link is firmed up by next month the committee's hand would be tipped to moderating such inflation in order to stay within its targets.
MPC members have also made reference to continued recovery in the US, in particular the much stronger than expected increase in March employment figures.
Add to that yesterday’s comments by Federal Reserve chairman Alan Greenspan that the risk of deflation has receded, and inflationary pressures could start picking up around the globe.
Overall, however, the decision has been made to wait for the Bank of England's next Inflation Report due out next month to better sift through the different indicators of inflationary pressures in the UK.IFAonline
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