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MPC dissidents wanted rate hike

Two members of the Bank of England's monetary policy committee (MPC) voted in favour of an interest rate hike in April's decision, it has been revealed.Minutes of the April 5th meeting show that MPC members Tim Besley and Andrew Sentance preferred a quarter-point raise. All other members approved a hold at the present 5.25 per cent base rate.The decision to hold interest rates for the third consecutive month was made because some members felt "there was no compelling case for a change", the minutes reveal.Uncertainty about the US economy and UK consumption, together with evidence about the degree of slack for firms and in the labour market, meant it was unclear whether upside or downside risks were dominant.Others felt that inflation risks were largely upward, but felt that the potential destabilising impact of an increase in the context of only "limited expectation" was not worth risking.Mr Besley and Mr Sentance believed that an interest rate was justified because "demand pressures were likely to add to existing tight capacity pressures, slowing the reduction in consumer price index (CPI) inflation in the short-term and adding to medium term risks". Since the April 5th meeting the Office for National Statistics (ONS) has revealed that CPI inflation jumped to 3.1 per cent, forcing Bank of England governor Mervyn King to write an explanatory letter to chancellor Gordon Brown.This unexpected leap has resulted in widespread expectations that the MPC will be forced to implement a rate rise in May's decision.When it meets at the start of next month the MPC will have at its disposal the contents of the Bank's quarterly inflation report. Those arguing the case for uncertainty in the April decision admitted in the minutes that "it would be particularly useful to process the news in the context of the May report".

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