The Bank of England has maintained its 6-3 vote to keep interest rates at a record low this month, seeing no major change in the medium-term inflation outlook, minutes to its May 4-5 policy meeting showed today.
Economists had seen a small chance that either Monetary Policy Committee member Spencer Dale or Martin Weale would drop their call for higher rates this month following sluggish first-quarter growth and new BoE forecasts.
However, the minutes showed that Mr Dale, Mr Weale and outgoing member Andrew Sentance all saw a strong case for higher rates; though in Dale and Weale's case it was finely balanced due to the weakness of the real economy and the uncertain outlook.
This kept the voting pattern unchanged for a fourth consecutive month, with Sentance voting for a 50 basis point increase and Dale and Weale favouring a 25 basis point rise in the current 0.5% Bank rate.
Other members did not yet see sufficient justification to raise rates.
'There was little evidence that elevated inflation expectations were becoming entrenched in wage and price setting.
'Nonetheless that risk remained material given the elevated n ear-term outlook for inflation,' the minutes said.
Official data yesterday showed that consumer price inflation surged more than expected in April to a 30-month high of 4.5%.
Last week's update to the BoE's quarterly inflation report said that CPI would reach 5% later this year, and was more likely than not to exceed its 2% target throughout 2012.
Those MPC members voting to keep rates steady stressed the uncertain economic outlook.
'The probability of that risk crystallising was hard to evaluate, in part because there were mixed signals from indicators of business and consumer confidence, the interpretation of which was further complicated by the impact of the snow in December and erratic movements in construction output,' the minutes said.
However, those wanting to raise rates said the economic fog was unlikely to clear for months to come, and there was too much risk in waiting longer before raising rates.
Adam Posen reiterated his call for an extra £50 billion of quantitative easing, saying that consumption spending would be lower than forecast in the inflation report.
May was the final meeting for Mr Sentance, who will be replaced by former Goldman Sachs economist Ben Broadbent from June.
