Deputy governor 'voted for December rate rise

The Bank of England's deputy governor voted to raise interest rates earlier this month, minutes from the monetary policy committee meeting showed today.

However, Andrew Large was outvoted by his eight colleagues on the Bank's monetary policy committee at the December 3 and 4 meeting.

The rest of the committee, including the governor, Mervyn King, and the other deputy, Rachel Lomax, preferred to adopt a wait-and-see approach after a quarter-point rise in November that nudged rates up to 3.75%. November's move was the first rise in borrowing costs in almost four years.

Mr Large (who had also voted for a rise in November) argued that another upward move was justified because of the "vulnerabilities created by the continued build-up of household debt." Higher borrowing costs, Mr Large said, would more likely ensure a dampening effect on consumption and on the further accumulation of debt.

The release of the Bank's minutes coincided with a new batch of unemployment data, which showed that inflationary pressure remained under wraps despite a tight labour market. Average earnings growth, the Office for National Statistics reported, stood at 3.6% - unchanged from last month, and well below the Bank's comfort level of 4.5%.

Despite the absence of inflationary pressure from today's unemployment data and yesterday's low inflation figure for November, analysts still believe that a rate rise is on the cards for February.

"Both the BoE minutes and the labour market data are on the bullish side of expectations ...The minutes shows the committee discussed the need for further tightening in policy although there wasn't a huge amount of support for that idea at this point. Regardless of the benign inflation data we had yesterday, we still feel that the Bank will find it necessary to raise interest rates by another 25 basis points when they meet in February," Paul Robeson, economist with Bank One, told Reuters.

Indeed, Bank minutes warned that a further increase in rates "would be warranted at some point" if the UK economy continued to progress in line with expectations.

In its assessment of economic conditions, the Bank said the US economy was growing particularly strongly, while the eurozone too also showing signs of recovery. As for the UK, the Bank said the news on the month had been positive, with an upward revision to third-quarter growth. However, that was accompanied by a continuing imbalance in the economy with consumer demand remaining strong while business investment fell back.