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LONDON (Thomson Financial) - A shadow monetary policy committee has narrowly voted for the Bank of England to keep interest rates on hold at their six-year high of 5.50 pct when it meets later this week.
However the group, made up of economists from academia and the financial sector, were fairly divided in their views for what immediate BoE policy should be, with one member calling for a 50 basis point rise, three for a quarter point rise and the remaining five to leave rates unchanged.
The most hawkish comments came from Roger Bootle, economic adviser to Deloitte, who said the risk that inflation could get out of control is increasing.
"No-one should be fooled by the fall in inflation that will happen over the next few months; the issue is what will happen to inflation next year and beyond," he said.
Bootle argued that the MPC needs to take rates to a level which will have a real impact on borrowers and lenders, and this would best be done by shocking them with a 50 basis point rise.
"The stakes are too high to be pussy footing. It is time to take bold action," he concluded.
Three other members also believed rates should be raised, though only by a quarter point. These were Tim Congdon from the London School of Economics, Andrew Lilico from Europe Economics and David B Smith from the University of Derby.
Congdon and Lilco's main concerns were the rate of growth in the UK's broad money supply, while Smith cited the strength of the rate of growth in the UK economy, once the effect of the oil market is excluded.
Of the five remaining members who voted to keep rates on hold, two of them - Lloyds TSB economist Trevor Williams and Peter Spencer from the University of York - said they felt rates would probably need to be raised at some point in the coming months. This meant there was an overall bias on the committee for rates to rise in the near-future.
Finally three members - Peter Warburton, from Economic Perspectives, Patrick Minford and Kent Matthews, both from Cardiff Business School - voted for rates to stay on hold with a neutral bias going forward.
The real MPC is also expected to keep its key repo rate unchanged. Only 3 of the 32 economists polled by Thomson Financial News expect the MPC to lift borrowing costs a quarter point for the second month running.
LONDON (Thomson Financial) - A shadow monetary policy committee has narrowly voted for the Bank of England to keep interest rates on hold at their six-year high of 5.50 pct when it meets later this week.
However the group, made up of economists from academia and the financial sector, were fairly divided in their views for what immediate BoE policy should be, with one member calling for a 50 basis point rise, three for a quarter point rise and the remaining five to leave rates unchanged.
The most hawkish comments came from Roger Bootle, economic adviser to Deloitte, who said the risk that inflation could get out of control is increasing.
"No-one should be fooled by the fall in inflation that will happen over the next few months; the issue is what will happen to inflation next year and beyond," he said.
Bootle argued that the MPC needs to take rates to a level which will have a real impact on borrowers and lenders, and this would best be done by shocking them with a 50 basis point rise.
"The stakes are too high to be pussy footing. It is time to take bold action," he concluded.
Three other members also believed rates should be raised, though only by a quarter point. These were Tim Congdon from the London School of Economics, Andrew Lilico from Europe Economics and David B Smith from the University of Derby.
Congdon and Lilco's main concerns were the rate of growth in the UK's broad money supply, while Smith cited the strength of the rate of growth in the UK economy, once the effect of the oil market is excluded.
Of the five remaining members who voted to keep rates on hold, two of them - Lloyds TSB economist Trevor Williams and Peter Spencer from the University of York - said they felt rates would probably need to be raised at some point in the coming months. This meant there was an overall bias on the committee for rates to rise in the near-future.
Finally three members - Peter Warburton, from Economic Perspectives, Patrick Minford and Kent Matthews, both from Cardiff Business School - voted for rates to stay on hold with a neutral bias going forward.
The real MPC is also expected to keep its key repo rate unchanged. Only 3 of the 32 economists polled by Thomson Financial News expect the MPC to lift borrowing costs a quarter point for the second month running.
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