Bank of England policy makers voted 7-2 to keep the benchmark interest rate at a record low this month as some of the majority began to raise concerns about potential inflation pressures.
Minutes of the Monetary Policy Committee’s Nov. 5-6 meeting showed the majority in favor of maintaining the key rate at 0.5 percent — which includes Governor Mark Carney — had a “material spread of views on the balance of risks.” While some of those views were focused on the possibility of weaker U.K. growth, others cited the potential for a faster decline in excess capacity in the economy, boosting inflation.
“There was a risk that growth might soften further than anticipated” and premature tightening “would leave the economy vulnerable to shocks,” the MPC majority said. “Against this, however, there was also a risk that the degree of spare capacity would be eliminated more quickly than assumed,” which would “potentially result in inflation rising to, and subsequently overshooting, the 2 percent target.”
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