THE two members of the Monetary Policy Committee who had been pushing unsuccessfully for an immediate rise in UK base rates since last August have abandoned this stance, it has emerged.
Minutes of the Bank of England committee's January 7 and 8 meeting, published yesterday, show external members Martin Weale and Ian McCafferty voted with their seven MPC colleagues to hold UK base rates at their record low of 0.5 per cent two weeks ago.
A tumble in annual UK consumer prices index (CPI) inflation was cited as the reason, although the minutes note the decision on rates for Mr Weale and Mr McCafferty was "finely balanced".
The change of stance by the two MPC members fuelled further financial markets' expectations that the first rise in base rates from their record low, where they have been since March 2009, is still a while away.
Sterling fell close to 18-month lows against the dollar after publication of the minutes.
Although it recovered from intra-day lows around $1.5075, the pound was at 5pm in London yesterday down nearly half-a-cent on the day against the US currency at $1.5116.
Official figures last week showed annual UK CPI inflation plunged to 0.5 per cent in December - its joint-lowest since comparable records began in 1989 - prompting Scottish Chambers of Commerce to declare this should ensure future rises in interest rates are pushed back still further.
Setting out the rationale of Mr Weale and Mr McCafferty at the MPC's January meeting, the minutes state: "They believed that the sharp fall in inflation to below the two per cent target was probably driven largely by temporary factors and was unlikely materially to affect the behaviour of households and businesses in such a way that it became self-perpetuating.
"They also noted the most recent evidence that wage growth was more buoyant than they had expected. Nevertheless, they noted the risk that low inflation might persist for longer than the temporary factors implied and concluded that this risk would be increased by an increase in Bank Rate at the current juncture."
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