CITY A.M. | SHADOW MPC REMAINS DIVIDED OVER INTEREST RATES

ALLISTER HEATH | CITY A.M.
“Quarter per cent rise. With CPI inflation stubbornly sticking to 4.5 per cent and likely to rise further, at least a small move towards normalisation is warranted. The economy is sluggish, but still growing.”

SIMON WARD | HENDERSON
“Raise to one per cent. High inflation threatens to become entrenched. Slow broad money expansion is no excuse for inaction because velocity is trending higher in response to increasingly-negative real interest rates.”

GEORGE BUCKLEY | DEUTSCHE BANK
“Raise by 0.25 per cent. Despite uncertainties surrounding the recovery, output continues to grow and inflation remains elevated. This suggests that interest rates are too low at their current stimulatory levels.”

GRAEME LEACH | INSTITUTE OF DIRECTORS
“Hold the base rate. Money supply growth is near zero, real incomes are falling, the savings ratio is already low, the Spending Review is kicking in and the output gap is widening. End of story.”

VICKY REDWOOD | CAPITAL ECONOMICS
“With the economic recovery still struggling, I would leave interest rates on hold. Indeed, if things carry on like this, more quantitative easing will start to look necessary.”

TREVOR WILLIAMS | LLOYDS TSB
“Weak data suggest that the economy cannot yet withstand a rate hike. Nevertheless, as soon as it looks like it can, a rate rise will be necessary to ensure that inflationary expectations remain anchored.”

HOWARD ARCHER | IHS GLOBAL INSIGHT
“No change to rates. Current sluggish economic activity and major concerns over the growth outlook justify 0.5 per cent rates but I’m not convinced of the case for more QE, particularly given ongoing inflation risks.”

JAMIE DANNHAUSER | LOMBARD STREET RESEARCH
“Indicators of global activity have turned down sharply. With the spectre of further contagion in European financial markets, the MPC should tread very carefully. No change in Bank Rate is warranted.”

VICKY PRYCE | FTI CONSULTING
“Hold. Nothing has changed to increase inflation prospects. Indeed there’s more chance of another dose of QE than a hike at this point with negative pointers for UK domestic indicators,.”