THE Bank of England took a small step towards raising interest rates during a notably “hawkish” policy meeting earlier this month.
Two members of the monetary policy committee (MPC) voted in favour of a 0.25 per cent increase in rates.
Implied interest rate futures based on overnight index swaps were pricing in a 44 per cent chance of a 25 basis point rate hike in May, up from 30 per cent before the minutes were released. And the pound rose against the dollar yesterday after the minutes were published, strengthening as much as 0.5 per cent to $1.5892 before falling back slightly throughout the afternoon.
The FTSE hovered around the 6,000 mark as the minutes were announced, before giving up some of the morning’s gains.
However, six members of the MPC voted to keep rates at half a per cent. And having met on 13 January, the MPC was unaware of the shock contraction in the economy in the fourth quarter of 2010, reported on Tuesday of this week.
Martin Weale, who joined the MPC last summer, surprised analysts by voting for a rise in rates.