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Bank tempted by half-point hike in May meeting

The Bank of England considered raising interest rates by 0.5 per cent to 5.75 per cent in its May decision.Minutes from the May meeting of its monetary policy committee (MPC) show unanimity on the eventual decision to raise the base rate by 0.25 per cent to 5.5 per cent.Despite not having raised rates by a half-point since chancellor Gordon Brown granted the Bank independence on rate-setting in 1997, MPC members considering the hike were tempted to curb upward inflationary pressures in the British economy."For some members, the question was whether bank rate should be increased by 25 basis points or whether there was a case for a rise of 50 basis points â€" given the upside risks to inflation over the medium term and the buoyant outlook for growth and demand," the minutes state.The decision to raise rates by the usual quarter-point was eventually taken because of "uncertainties" about the impact of past hikes and concerns that a 0.5 per cent increase might "create downside risks to growth".Despite this the minutes indicate the MPC is prepared to raise interest rates again if the UK economy continues to perform to expectations this summer."The committee agreed that, should the economy continue to develop broadly in line with the central expectation, bank rate could be raised further as necessary," the minutes conclude.

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