The bank’s Monetary Policy Committee is working on the premise that inflation is likely to continue to run above its 2% target “for some time”, thereby raising the likelihood that such a level of inflation might come to be seen as the norm.
It also suggests UK growth will stay below its historical average in the middle of 2010 while there is continued evidence of global output growth slowing down.
Chris Alexander, head of investment strategy at BNP Paribas Wealth Management says: “The first 25 basis point interest rate rise is now forecast for next July, having been May prior to the minutes being released. Weakening economic data has prompted this review which some economists warn will be difficult to implement against a backdrop of inflation being more than double the Bank of England’s 2% target.
"For perspective, QE1 ran from March 2009 to February 2010 and saw £200bn of gilts and some corporate bonds bought by the Bank of England.”
When it came to the vote on interest rate levels, Spencer Dale and Martin Weale were the only two members of the MPC who wanted to see a rise of 0.25% with the remaining seven in favour of the status quo.
The MPC also debated whether or not to increase the levels of quantitative easing, with Adam Posen the sole individual who argued in favour of pushing it up from £200m to £250m.
