MPC holding firm on rates

INTEREST rates look set to stay at historic lows for several more months after minutes from the Bank of England monetary policy committee's August meeting yesterday showed members voted eight to one in favour of keeping rates on hold.

MPC member Andrew Sentance urged a quarter-point rise from 0.5 per cent for the third consecutive month, the minutes revealed.

But other committee members thought it best to keep monetary policy loose and maintain a 200 billion asset purchase scheme to free up bank lending to the fragile economy.

The minutes said the MPC "stood ready to respond in either direction as the balance of risks (on economic growth versus inflation] evolved".

The MPC cited concerns that a spike in wheat prices after the Russian firestorms might further feed inflation this year.Philip Shaw, an economist at Investec, said: "The tone suggests that the MPC is firmly in neutral mode."