Pole position maintained by Bank’s doves

Julian Harris
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TWO THIRDS of the Bank of England’s monetary policy committee continued to oppose any normalisation of interest rates this month.

As the committee’s uber-hawk Andrew Sentance bowed out, after a term of over four and a half years, the meeting’s minutes revealed little appetite for a rise in the Bank rate.

Sentance, who has called for a rate hike since last summer, will now be replaced by Ben Broadbent, who has provided scant evidence of how he will vote on the committee.

While the remaining two members voting for a rate hike are less convinced about the move than Sentance, there is a schism between them and the six members voting for no change.

Governor Mervyn King and his dovish allies argued that “the coming months could be revealing” about the strength of demand in the UK, opting to continue their policy dubbed “wait and see”.

There are still “few material signs” of inflationary pressures feeding into second round effects, the minutes said.

For the three hawks on the committee, which include Martin Weale and Spencer Dale, “it was unlikely that the uncertainty over the strength of the recovery in demand would be resolved soon, so there was little benefit from waiting before tightening policy.”

This month’s inflation report, which admitted that the Bank could miss its inflation target until 2013, has “reinforced” the case for a modest rise in rates, the hawks are recorded as saying in the minutes.

While recognising downside risks to inflation, members supporting a rate rise said that upwards pressures “continued to outweigh” risks on the strength of the recovery.

Sentance’s last vote on the committee was for a half percentage point rise, with Weale and Dale voting for 0.25 per cent.

Adam Posen again voted for more quantitative easing.