For Immediate Release.
The SMPC voted overwhelmingly to increase base rates by 0.25% expressing a view that the tightening of monetary policy by the Bank of England had not yet gone far enough. One member would have preferred no increase in interest rates and one member would have preferred a 0.5% increase.
Members agreed that the international economic data suggest that, whilst global inflation remains relatively subdued, world GDP growth is buoyant. World export growth has picked up and US employment growth has also recovered. However, monetary indicators in the euro zone and the US were not indicative of rising inflation.
Members also felt that the situation in the UK was rather different from the international economic outlook. Whilst overall GDP growth is in line with historical trends, many sectors within the private sector are weak and are poised to get weaker as the impact of increased taxes and regulation bites further. The public sector is growing strongly. Monetary growth is relatively strong and the SMPC agreed that private sector weakness should not be used as a reason for not increasing interest rates.
Overall, the SMPC voted for a 0.25% rise in interest rates to 4.75%, (with only one member voting against).