Bank was sure on pegging rates

Only one of the nine members of the Bank of England's monetary policy committee (MPC) voted to increase interest rates at the committee's last meeting, on April 8.

The MPC's minutes, released today, reveal that the Bank's deputy governor, Sir Andrew Large, favoured an increase of 0.25%.

The MPC kept rates at 4%, though the need to discourage "unsustainable rates of house price inflation" was recognised.

The committee also acknowledged it would be "appropriate to withdraw some of the monetary stimulus in due course".

The minutes report that one member of the MPC, probably Sir Andrew, warned of the vulnerability of an increasingly fragile housing market to shocks.

The committee member warned that debt, relative to disposable income, had reached historically high levels.

They also suggested that the high growth rate in secured and unsecured debt pointed to high spending growth in the short term.

The committee also acknowledged that a rate rise had been so widely predicted that it would not trigger a rise in sterling or surprise the financial markets.

However, these issues were not sufficient to overcome the committee's objections to a rate rise.

The committee emphasised that the 0.25% rise in February had been undertaken to address inflationary pressures, which had not increased significantly since the decision.

Furthermore, some members believed the rise in the strength of sterling was offsetting the impact of the strengthening housing market on prospective consumption and growth of domestic demand.

The consumer price index's inflation rate stood at 1.3% at the time of the decision, only 0.4% above the level at which the governor of the Bank of England would have to write an open letter to the chancellor explaining why and how this had happened.

Certain members of the committee had expressed fears that some threats to inflation remained, such as sluggish euro-area demand and increased "geopolitical risks to world demand".

The committee had looked at a poll by the news agency Reuters of 44 economists, in which 19 said they expected a 0.25% rate rise and 25 predicted no change.

All 44 predicted that the MPC would authorise a rise in May if, as happened, the April meeting resulted in no increase.

"In a way, they are still sticking to the pace that they have adopted since November - a quarter-point rate hike per quarter," said Joachim Fels, an economist at Morgan Stanley.

"I still see another rate hike in May, and nothing in the minutes has changed that view."