THREADNEEDLE STREET SPLIT OVER INTEREST RATES
A DEEP divide has opened at the Bank of England over the best way to tackle redhot inflation.
A three-way split emerged in the ninestrong Monetary Policy Committee (MPC) as officials disagreed over how much interest rates should rise.
Five policy makers, including Governor Andrew Bailey, opted for a 0.5 percentage point hike, taking rates to 2.25pc.
Three, including Catherine Mann, backed a more aggressive 0.75 percentage point move. And new member Swati Dhingra voted for a 0.25 percentage point rise.
The Bank has been raising interest rates at an unprecedented speed since December in a bid to get a grip on inflation.
But it has been criticised for not doing enough as inflation soared to a 40-year high of 10.1pc in July before easing to 9.9pc in August.
The Bank was expected in many quarters to raise rates by 0.75 percentage points after big rises from the US Federal Reserve and European Central Bank this month.
Andrew Sentance, a former member of the MPC, said the committee ducked a 0.75 hike and took a soft option instead. ‘An official Bank Rate of 2.25pc will not curb UK inflation when it is around 10pc. It is a shame that the MPC don’t grasp this basic fact,’ he said.
Julian Jessop, economics fellow at thinktank the Institute of Economic Affairs, said it was ‘another missed opportunity to regain credibility’. He noted the Bank was planning to reverse its enormous pandemic-era money-printing programme by offloading some Government bonds.
The MPC said that it would sell £80bn worth back to investors over the next 12 months, taking the total on its books down to £758bn.