Rate split reduces fears of further rise

Posted: 25 Jan 2007 11:05:51 GMT

Fears of imminent further rises to the cost of borrowing have receded slightly after the Bank of England revealed that a vote on rates this month had been on a knife-edge

Fears of imminent further rises to the cost of borrowing have receded slightly after the Bank of England revealed that a vote on rates this month had been on a knife-edge.

Notes from the bank's monetary policy committee showed that it was split five to four on the decision to increase rates a quarter point to 5.25 per cent.

The decision took the vast majority of economists, who had predicted that the bank would hold fire on interest rates until wage figures appeared in February, by surprise.

"The committee noted that an immediate change in bank rate would clearly be a surprise to the markets," the minutes of the January 11th meeting read.

"For the majority of members there was already sufficient evidence to justify an increase in bank rate and no compelling reason to delay," the minutes add.

Key to the decision were inflation figures available to the bank but not released to the public when the meeting took place on January 11th.

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