MPC vote unanimous but concerns over inflation rise

IT WAS another unanimous vote from the Bank of England’s Monetary Policy Committee (MPC) this month, but minutes published yesterday revealed worries among some members about the level of inflation.

The unanimity was unsurprising given the proximity of the general election and the committee agreed that the events of the past month “had not been significant enough” to alter materially their views of the outlook for inflation and activity. It was also more confident that the UK’s recovery had begun in earnest.

But economists noted that perceptions are slowly shifting about the future path of inflation.

Jamie Dannhauser at Lombard Street Research, said: “There is also a growing concern among some committee members that high rates of actual inflation, in an environment of extraordinarily easy monetary policy, threaten to dislodge private sector inflation expectations.”

He added: “On balance, though, it would seem that the MPC is less dovish than it was at the time of the last Inflation Report and on course to remove some of its monetary stimulus before the year is over.”

The Bank would not have known about the strong March inflation data when it met but further rises will no doubt stoke their worries about inflation. Its next interest rate decision has been rescheduled to 10 May so as to not clash with the election.