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MPC minutes suggest rate hike on way

20 Jun 2007

Minutes released by the Bank of England suggest that a rise in interest rates could come next month.

The record of the June 7th vote held by the Monetary Policy Committee (MPC) was much closer than analysts had expected, with four out of the nine-member panel favouring a quarter-point increase.

So it was only by one vote that the rate stayed at 5.5 per cent this month.

"The minutes were far more hawkish than the market was looking for," Ian Stannard of analyst firm BNP Paribas told ABC News.

The impact of the announcement of a split in the committee was quickly felt on the exchange rate market.

"Sterling is gaining a lot of support as the market has now brought forward its expectations for the next rate hike to July from August," Mr Stannard said.

A rise in interest rates will again dampen down the housing market as sales and buying costs rise - which could spell difficulties for investors or prospective buyers as it would follow four rate rises since August last year.