Bank of England’s Sentance the lone voice for interest rate rise

Most of the Bank of England’s rate-setting committee remain happy to keep the base interest rate at the record low of 0.5% as the risks to the UK economy remain very finely balanced, minutes from the committee’s last meeting show.

Monetary Policy Committee members voted seven to one against lifting rates with only Andrew Sentance voting for a rate hike.

The move was widely expected after recent interviews with the press and Sentance's vote for an increase last month.

The minutes show one member, presumably Sentance, thought it was appropriate to start to withdraw some of the exceptional monetary stimulus.

'Economic conditions had improved over the past twelve months and the inflation outlook had shifted sufficiently to justify beginning to raise interest rates gradually,' the minutes show.

But sterling retreated from earlier highs to trade up just 0.5% against the dollar as the minutes show the bank thought about introducing more stimulus for the economy, dashing hopes a rate hike may be around the corner. 

Members said data from both the UK and the US was mixed and difficult to interpret and it is still not clear how inflation will progress over the months ahead. 

There was some concern about signs of a slowdown in the US and weakness in UK manufacturing and in particular exports. But given they agree inflation was likely to remain above target for some months and there was a risk that medium-term inflation expectations would rise, they decided another boost would be misplaced.

Inflation has fallen for two consecutive months and was at 3.2% in July - still far above the Bank's 2% target.

David Kern, chief economist at the British Chambers of Commerce, welcomed the decision to hold rates. 

Like others he believes interest rates will remain on hold for months, possibly years and there is still a likelihood that the Bank of England will decide to pump yet more money into the economy if the economic outlook deteriorates further.