One bear in the Monetary Policy Committee

In Article 8 of the new edition of Reading and Understanding the Financial Times I take a look at the role of the Bank of England's Monetary Policy Committee (MPC). The key activity of the MPC is to set the level of official UK short-term interest rates (called the Repo Rate) which is consistent with the government's 2% target for consumer price inflation (CPI). With the level of the CPI currently at an annual rate of 3.4% it should come as no surprise that one member of the MPC is arguing for a rise in interest rates for the first time in almost two years. The person in question is Andrew Sentance and he voted to raise the repo rate to 0.75% from the record low of 0.5%, due to his concerns about inflation. It was the first call for a UK rate rise by an MPC member since August 2008 and it came as a considerable surprise to most City economists who had predicted an unanimous decision in favour of holding interest rates at 0.50%. The other eight MPC members all called for rates to be held at its June meeting and the 7-to-1 majority kept rates at 0.5% for the 15th month in a row.