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Bank of England divided on need for rate rise

AFP | Last Updated: Wednesday, August 20, 2014 - 15:34

The Bank of England is divided on whether to maintain record-low interest rates as minutes published on Wednesday revealed its first split vote for more than three years.

The 7-2 vote in favour of keeping the BoE`s main lending rate at 0.50 percent at its August policy meeting was the first non-unanimous decision on borrowing costs since July 2011.

The split was significant because two members of the policy committee voted for the key rate to be increased.

Markets are watching to see when the Bank of England will embark on a round of interest rate rises as Britain`s economic recovery outpaces the neighbouring eurozone.

"For two members, in particular, economic circumstances were sufficient to justify an immediate rise in Bank Rate," the minutes said.

The two, Ian McCafferty and Martin Weale, voted for a rise to 0.75 percent, while the seven other members of the Monetary Policy Committee which includes governor Mark Carney called for the rate to stay unchanged.

The BoE`s main lending rate has stood at 0.50 percent since March 2009.

"For most members, there remained insufficient evidence of inflationary pressures to justify an immediate increase in Bank Rate," the minutes added.

Official data on Tuesday showed that Britain`s 12-month inflation slid to 1.6 percent in July, moving further away from the BoE`s target rate of 2.0 percent.

First Published: Wednesday, August 20, 2014 - 15:34
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