MPC hawk Sentance calls for 0.5% rate rise

Monetary Policy Committee (MPC) hawk Andrew Sentance has upped to 0.5% the amount he believes interest rates should immediately rise.

Previously the MPC rebel (pictured) had been calling for a 0.25% increase in the Bank of England base rate.

But minutes from the Committee's February meeting show he has now doubled that to a full half a percentage point increase.

Bank governor Mervyn King has kept interest rates at an historic 0.5% low for 23 straight months.

Fellow members Spencer Dale and Martin Weale preferred to increase the Bank Rate by 25 basis points.

Of those members not favouring a rise in Bank Rate, some thought the case for an increase had nevertheless grown in strength, according to the minutes.

For the three members calling for a rate rise, the case for removing some monetary stimulus at the February meeting was "compelling".

The minutes say: "For those members, the upside risks to the medium-term inflation outlook from global inflationary pressures and the possibility that inflation expectations would move up outweighed the downside risks."

Downside risks to inflation relate to uncertainty about the strength of the recovery and the possibility of persistent spare capacity, it says.

The other six members voted with King to keep rates the same.

On quantitative easing (QE), all the Committee members except Adam Posen voted for keeping the asset purchase programme at £200bn. Posen wants to increase QE by another £50bn.

Jeremy Cook, chief economist at World First, says the split in the MPC heightens the chance that we will see an interest rate rise in May.

"The reappraisal of Q4's GDP figure on Friday will be key to the market's mentality in the coming weeks and could see this newly found hawkishness nipped in the bud.

"We also have to remember Andrew Sentance, who voted for a 50bps increase, is leaving soon and I doubt that Martin Weale is ready to take up the super-hawk baton," he says.