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[LONDON] Most Bank of England policymakers were firmly against raising interest rates when they met earlier this month, seeing little evidence of inflation pressure, with only two continuing to vote to tighten monetary policy.
Minutes of the BoE's Monetary Policy Committee's meeting on Oct. 7-8 showed the Bank believed the amount of spare capacity in Britain's economy was being reduced less quickly than it had previously expected.
In another sign the BoE was in no hurry to raise rates, most of the MPC's nine members saw "few signs" of inflation pressures building, even taking into account how the stronger pound was lowering import prices, something that could prove temporary. "For these members, there remained few signs of inflationary pressure in the UK economy, even after looking through the effects of a stronger sterling exchange rate," the minutes said.
External members Martin Weale and Ian McCafferty voted to raise interest rates to 0.75 per cent from their record-low 0.5 per cent, as they did in August and September.
They said keeping rates low could unbalance Britain's economic recovery and long delays in the effectiveness of interest rate rises meant an increase now was needed.
But most of the MPC members felt raising rates now could leave Britain vulnerable to possible future shocks to the economy.
They said pay growth was lower than needed for the Bank to meet its 2 per cent inflation target and "further downside news in the euro area had increased the risks" to Britain's economy.