MPC remains split on interest rates

The Bank of England's Monetary Policy Committee (MPC) has remained split three ways on interest rates, minutes of its latest meeting show.

Earlier this month, the committee decided to keep the bank rate at 0.5% for a record 26th month in a row, while the quantitative easing programme was maintained at £200bn.

The minutes for the most recent meeting show six members voted to keep the current rate, with outgoing member Andrew Sentance opting for an increase to 1% and Spencer Dale and Martin Weale preferring a hike to 0.75%.

Meanwhile, Adam Posen was the sole MPC member to call for a £50bn increase in the quantitative easing programme.

The minutes say: "Overall, the balance between the upside and downside risks to the outlook for inflation in the medium term had not changed sufficiently over the month for committee members to change their views on the appropriate stance of monetary policy.

"The pace of recovery was more likely than not to pick up from its recent soft patch.

"It was likely that there would be some continued recovery in business investment and that exporters would continue to benefit from the global recovery and the past depreciation of sterling."

The bank remains under pressure to increase the rate in order to fight high inflation, which remains well above the 2% target.

Yesterday, the Office for National Statistics revealed the CPI rate hit 4.5% in April, its highest level since September 2008.

In a letter to the Chancellor, Bank of England governor Mervyn King blamed the high inflation on the increase in VAT in January to 20%, higher energy prices and increases in import prices.

He added: "The MPC judges that attempting to bring inflation back to the target quickly risks generating undesirable volatility in output and would increase the chances of undershooting the target in the medium term."