BoE Minutes Of Meeting

BoE MPC voted by 7-2 margin to raise key repo rate to 5.00 pct at Nov 9 meeting, MPC members Blanchflower and Lomax voted to keep the rate unchanged at 4.75%. Most of the analyst expected the vote wouldbe 8-1 Blanchfower leaving the only dove. Blanchflower said the recentspike in inflation was mainly related to large gas and electricity price rises, which were still more than offsetting the recent fallback in petrol prices. Lomax, placed more weight on the downside risks to demand and inflation and noted there were signs of weakness in the output and retail sales data at a time when the August rate rise had yet to be fully felt. The member noted that the rise in unemployment had in part been caused by relatively weak demand for labour, and so was more likely to be associated with downward pressure on wages.

The minutes showed that the majority thought a hike was necessary, given the balance of risks, to bring CPI inflation back towards the target of 2.0 pct. Last week's Inflation Report showed that the BoE expects inflation to rise further in the near-term, but not to 3.0 pct,before easing back towards the target.

The minutes showed that the MPC thought consumer spending appeared to be growing at close to its long-run average and that the buoyant housing market might pose an upside risk to future consumption growth. However the nine-member panel noted that the housing effect may be offset by a rising debt burden and a sharper than anticipated downturn in the US.