MPC minutes: The hawks capitulate

Sterling has dropped against the dollar after the latest MPC minutes revealed no calls for a rate hike and opened the door to further QE.

The minutes revealed Spencer Dale and Martin Weale, both of whom had voted for a rate hike of 0.25% for much of this year, opted to support the proposition to keep rates on hold in August.

"The slowing in world demand growth and the heightened tensions in financial markets meant that the balance of risks to the medium-term inflation outlook had clearly shifted to the downside," the minutes said.

Adam Posen remained the only member to call for further quantitative easing, though the minutes suggested "further asset purchases might nonetheless become warranted were some of the downside risks to materialise".

The decisions were made at the committee's meeting on 3 and 4 August, amid steep falls in global stock markets and shortly before the Bank downgraded its 2011 GDP forecast from 1.8% to 1.5%.

Weale began calling for the base rate to rise from 0.5% to 0.75% in January of this year, with Dale joining him in March. The MPC's biggest hawk, Andrew Sentance, had called for a rate hike since 2010 but left the committee in June.

Sterling fell against both the dollar and the euro following the publication of the minutes. The currency is down 0.46% on the day against the dollar at $1.637, with the euro jumping 0.44% to 87.97p.