The newest member of the Bank of England's rate-setting Monetary Policy Committee has voted with the majority to keep the key rate at an all-time low of 0.5 percent, reinforcing market expectations that borrowing costs may not rise this year.
Minutes of the MPC's June meeting released Wednesday showed that seven rate setters, including new member Ben Broadbent, voted to keep borrowing costs unchanged, while two, Spencer Dale and Martin Weale, voted for a quarter percentage point hike.
The arrival of Broadbent, a former senior economist at Goldman Sachs, at the Bank has made the rate-setting body a little less likely to raise interest rates anytime soon, analysts said, as he replaced Andrew Sentance, the most hawkish member of the panel over the past year. Sentance had been pushing for a rate hike to 1 percent at the last few meetings.
"The replacement of inflation hawk Sentance with the more dovish Broadbent has reduced the number of members voting for a rate rise by one and increased the chance of monetary policy remaining unchanged this year," said Scott Corfe, economist at the Centre for Economic and Business Research.
Despite concern about annual consumer price inflation at 4.5 percent, more than double the bank's 2 percent target, the minutes showed that all members of the panel agreed the outlook for growth was weak. Britain's economy produced no growth in output over the previous two quarters.
"There was continued evidence of a softening in the pace of global output growth, although it was possible this had primarily been caused by the supply-chain disruption resulting from the Japanese earthquake and tsunami, and the elevated level of oil prices," the minutes said.
In addition, rate-setters worried about the impact of Europe's debt crisis on the British economy.
"While activity in the euro area as a whole had remained resilient, sovereign debt and banking problems could intensify, perhaps significantly, to the detriment of economic activity and the financial system," the rate-setters said.
The body also voted 8-1 against pumping more money into the economy. Adam Posen again voted for an expansion in the program, known as quantitative easing.
However, the minutes showed that some other unidentified members felt that further asset purchases might be needed if demand remained sluggish.
The quantitative easing program, launched in March 2009, paused in December 2009 after the Bank had pumped 200 billion pounds ($325 billion) into the economy.
Vicky Redwood, senior U.K. economist at Capital Economics, said this was the first time that the minutes have mentioned anyone other than Posen talking about another monetary stimulus.