Daily Mail

RATE REVOLT

Key Carney deputies refuse to back his hike

- by Hugo Duncan

MARK Carney clashed with two of his deputies as the Bank of England yesterday raised interest rates for the first time in more than a decade.

The governor’s call for rates to rise from 0.25pc to 0.5pc was backed by a majority of the ninestrong Monetary Policy Committee (MPC) after hours of talks.

The Bank indicated that there could be two further rate hikes in the next three years, taking it to 1pc in 2020.

But two of the governor’s deputies – former Treasury mandarins Sir Jon Cunliffe and Sir David Ramsden – opposed yesterday’s rate rise, as a split emerged at the top of the Bank.

Calling for rates to be frozen at 0.25pc – where they have been since August 2016 – they argued that there was ‘insufficie­nt evidence’ to suggest wages would pick up as expected by other members of the committee.

As such, they were less concerned about upward pressure on inflation, leading them to vote against yesterday’s rate hike.

The rebellion pits Carney against two of his most senior lieutenant­s and suggests tensions are running high at the Bank over its handling of the economy.

Sitting alongside Carney at a press conference at the Bank’s headquarte­rs on Threadneed­le Street yesterday, Ramsden refused to comment on the clash, saying: ‘ I will have plenty of opportunit­ies in the coming period to explain in more detail my position.’

Carney added: ‘The difference­s of opinion, which you would expect with nine individual­s looking at a complex economy, are based on different views on the economic outlook.’

The rise followed a string of warnings from Carney and other MPC officials in recent weeks that such a move was on the cards.

Howard Archer, chief economic adviser to the EY Item Club, said: ‘A failure to follow through with an interest rate hike would have seriously threatened the Bank of England’s credibilit­y.’

But, adding that the split on the MPC was a sign that the case for higher interest rates was far from overwhelmi­ng, he went on: ‘The fact that two MPC members voted against the interest rate hike highlighte­d the fact that there was a realistic case for keeping interest rates at 0.25pc.’

Philip Shaw, an economist at banking group Investec, described the decision as ‘contentiou­s’ and said: ‘Not only were there two dissenters on the committee itself, but surveys reveal that the majority of City economists think the move was a bad one, or at least a risky one.’

Ramsden is the only member of the MPC who was present when interest rates were last raised in July 2007 – from 5.5pc to 5.75pc.

That was on the eve of the financial crisis and was swiftly followed by a cut five months later as the financial system teetered on the brink of collapse. Although he did not work for the Bank at the time, Ramsden was the chief economic adviser to the Treasury and sat in on MPC meetings.

Yesterday’s rise was backed by deputy governor Ben Broadbent, the Bank of England’s chief economist Andy Haldane, and MPC members Ian McCafferty, Michael Saunders, Silvana Tenreyro and Gertjan Vlieghe.

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