DESPITE warning of even higher than expected inflation to come, the Bank of England appears increasingly reluctant to raise interest rates.
Minutes of the Bank’s July meeting, released yesterday, suggest that bearish economic news has pushed the rate-setting committee even further from the first step in normalising rates.
“Recent developments had reduced the likelihood that a tightening in policy would be warranted in the near term,” the minutes state.
Following the release, some analysts speculated that the Bank is unlikely to raise interest rates until the second quarter of next year.
Rates have been kept at historical lows of 0.5 per cent since March 2009, while the Bank also launched a programme of asset purchases known as quantitative easing.
However, the committee alerted economists and struggling households to the near-term inflationary threat.
“In the light of recent developments in utility and food prices, the peak in inflation was likely to be a little higher and come sooner than the committee had previously expected,” the notes said.
Despite this, seven of the nine-man committee, including governor Mervyn King (left), voted against a rise in rates. Martin Weale and Spencer Dale continued to vote for a 0.25 per cent hike.
Adam Posen continued to be the only member to vote for a further £50bn in asset purchases.