“The MPC has been split for some time, so it comes as no surprise that the minutes reflect a wide range of views. The short-term pressures on inflation remain strong, but the majority of the committee still believes that inflation will come down towards the target over the medium-term. More significantly there is an understanding that the period of slow growth in the economy may be longer than previously thought. There is also a greater awareness of the potential negative effects of the debt problems in the Eurozone.
“There is now hope that rates will be kept on hold until early 2012. If this proves right, it would be a welcome development. It would be premature and potentially dangerous to raise interest rates while the government is implementing a very tough deficit cutting programme. With wage pressures remaining modest, and with businesses and consumers facing acute pressures, it is right to wait before raising rates. At present, only one member of the committee has voted for increasing the QE programme, but if the economy continues to shows sign of weakness in the next few months, the MPC should consider this option more seriously to avoid a setback.”