Wednesday, March 23, 2011
Another four-way split at the Bank
Posted by David Smith at 10:00 AM
Category: Thoughts and responses

In theory it would be possible for the nine different members of the Bank of England's monetary policy committee (MPC) to vote in nine different ways. In practice, the current four-way split - one 0.5 point hike (Sentance), two 0.25 (Weale and Dale), five no change and one for more quantitative easing (Posen) - is about as divided as it gets.

This is quite an interesting paragraph: "For several months, one of the key risks to the inflation outlook had been that the persistence of inflation above the 2% target might cause businesses and households to expect higher inflation in future, leading them to set higher prices and wages, and making it more costly for the Committee to meet the inflation target in the medium term. The increase in oil prices during the month had exacerbated that risk."

And this suggests that some but not all of the five "no-changers" are getting a bit uneasy: "There remained differences of view between these members on the likelihood of the upside risk associated with an increase in inflation expectations materialising. Some thought that this risk remained limited, given that the near-term outlook for inflation could be explained by reference to changes in energy and other
commodity prices, VAT and the sterling exchange rate. Others thought that this risk had risen, given further upwards revisions to the near-term outlook for inflation, and that the case for an increase in Bank Rate had strengthened in recent months."

We can guess that Mervyn King is in the former category. The question is how many are in the latter. The minutes are here.