Bank united on interest rate rise

THE Bank of England's monetary policy committee voted unanimously to raise the base rate earlier this month.

Minutes from the meeting concluded on 10 June and released today reveal all nine members voted for a quarter-point rise to 4.5%. It also showed the committee even entertained the idea of a half-point increase a month before.

There were few clues to suggest how quickly any further rate rises may follow. Markets are pricing in anything up to a full percentage point by the end of the year.

However, economists said signs of cooling in the housing market would make a third consecutive rate rise in July unlikely.

'Given the tone of the discussions at the June meeting, we would be most surprised if the authorities were to do anything other than sit on their hands in July,' said Simon Rubinsohn, chief economist at broker Gerrard.

'Significantly, over the past few weeks there has been further tentative evidence that the property market is beginning to respond to the uplift in mortgage rates, not to mention Mervyn King's recent speech.'

The Bank of England Governor last week warned on property market risks.

Alan Castle, economist at Lehman Brothers, also noted the emphasis on house prices. 'The discussion around the housing market is interesting because they do seem to be putting some weight on the weakness of some of the forward-looking indicators for the market,' he said. 'All in all I think this confirms our view that the MPC is probably going to be happy to sit on its hands until August.'

The minutes said that on balance the news since May suggested stronger external demand and inflation. The eurozone was looking stronger while recovery in the United States and Asia was more firmly established.

Oil prices, which had risen sharply so far in 2004, were expected to have only a modest impact on the British economy, the MPC noted. And while house price inflation had turned out to be stronger than expected, there were some tentative signs of it easing.