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| Version 0 | Version 1 |
|---|---|
| Three-way split on rate decision | Three-way split on rate decision |
| (about 8 hours later) | |
| The majority of Bank of England policymakers voted to keep rates steady at 5% at its July meeting, but one voted for a cut and another for a rise. | The majority of Bank of England policymakers voted to keep rates steady at 5% at its July meeting, but one voted for a cut and another for a rise. |
| The surprise split underscores the challenge faced by the Bank's Monetary Policy Committee (MPC) as it balances slowing growth with rising inflation. | The surprise split underscores the challenge faced by the Bank's Monetary Policy Committee (MPC) as it balances slowing growth with rising inflation. |
| Minutes of the meeting on 9-10 July showed that Timothy Besley wanted to raise the cost of borrowing to 5.25%. | Minutes of the meeting on 9-10 July showed that Timothy Besley wanted to raise the cost of borrowing to 5.25%. |
| David Blanchflower voted to reduce rates to 4.75%. | David Blanchflower voted to reduce rates to 4.75%. |
| 'Difficult decision' | 'Difficult decision' |
| The Bank said that inflation in June had been higher than expected but that data also suggested that growth was continuing to slow. | The Bank said that inflation in June had been higher than expected but that data also suggested that growth was continuing to slow. |
| "For all members of the committee, the decision was a difficult one," the minutes said. | "For all members of the committee, the decision was a difficult one," the minutes said. |
| "A rate change this month would be a surprise at a time when credit and other financial markets remained fragile," it added. | "A rate change this month would be a surprise at a time when credit and other financial markets remained fragile," it added. |
| The Bank has cut interest rates three times since August as the credit crunch has taken its toll on the wider economy. | The Bank has cut interest rates three times since August as the credit crunch has taken its toll on the wider economy. |
| Knife edge | |
| The BBC's economics editor Hugh Pym said that the next interest rate decision, which is due in August, was also likely to be balanced on a knife-edge. | |
| He explained that by then there would be more data on the extent of the economic slowdown and the Bank would have updated its inflation forecast. | |
| Ask five economists the same question you will get six different answers Hugh Pym,BBC economics editor Read Hugh's thoughts in full | |
| The economic climate could well have worsened but there may yet be another three-way split. | |
| The old joke says that if you ask five economists the same question you will get six different answers, our correspondent explained. | |
| It is not such a laughing matter when there are three different answers from the experts striving for the correct response to such troubled times for the economy. | |
| Predicament | Predicament |
| The vote for a rise in interest rates surprised financial markets and analysts said it signalled that further rate cuts might not be forthcoming. | The vote for a rise in interest rates surprised financial markets and analysts said it signalled that further rate cuts might not be forthcoming. |
| Vicky Redwood, UK economist at Capital Economics, said the split would bring talk of a rate rise onto the agenda. | Vicky Redwood, UK economist at Capital Economics, said the split would bring talk of a rate rise onto the agenda. |
| "We still think that a rate rise will be avoided. But a rate cut before November at the earliest now looks even more unlikely." | "We still think that a rate rise will be avoided. But a rate cut before November at the earliest now looks even more unlikely." |
| It was the first time the nine-strong MPC had been split three ways on the direction of interest rates since May 2006. | It was the first time the nine-strong MPC had been split three ways on the direction of interest rates since May 2006. |
| "The three-way split in the MPC's voting in July encapsulates the predicament that the Bank of England is in over a deepening economic slowdown yet elevated and rising inflation," said Howard Archer at Global Insight. | "The three-way split in the MPC's voting in July encapsulates the predicament that the Bank of England is in over a deepening economic slowdown yet elevated and rising inflation," said Howard Archer at Global Insight. |