“Following the change in the composition of the MPC, the minutes confirm that there was a welcome shift in the balance of opinion. Only two members, rather than three, voted for an immediate increase in interest rates. We have argued for some time that it would be premature and potentially dangerous to raise interest rates when the government is implementing its deficit cutting programme. Although annual inflation remains at 4.5% and is likely to approach 5% in the next few months, the committee is right to assume that inflation will fall steadily during 2012.
“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 beyond £200bn. But if the economy shows signs of weakness in the next few quarters, it would be right to consider this option more seriously to avoid a setback.”