Interest Rise more and more probable

 

Interest rates could rise after Bank of England chief economist Spencer Dale changes stanceInterest rates could rise as early as March after the Bank of England revealed that this month's meeting of policy makers as its most hawkish in years.

The pound rose more than half a cent against the dollar to $1.6238 after it emerged that Spencer Dale, the Bank's chief economist, had joined those calling for an immediate rate rise. The minutes from this month's meeting of the Bank's Monetary Policy Committee (MPC) also revealed a hard swing towards higher rates among the neutral members on the committee. "Some thought that the case for an increase had ... grown in strength," the minutes said.

Mr Dale is the first internal Bank member to break the house line that rates should remain at their current historic low of 0.5pc for the time being, and it was the first effective 6-3 split since July 2007.

Andrew Sentance has been calling for a rate rise since June and pressed harder this month by voting for an increase to 1pc. Martin Weale repeated his January call for a 0.25 percentage point rise, a position now backed by Mr Dale. At the other end of the spectrum, Adam Posen again voted for an extra £50bn of quantitative easing.

Interest rate futures nudged up two basis points after the minutes were published, suggesting the markets are more confident than ever about their predictions for a May increase. However, Simon Ward, Henderson's chief economist, said: "The minutes suggest that Bank Rate will rise in two weeks' time if revised fourth-quarter GDP figures and surveys for February indicate that economic recovery is continuing."

Despite the bullish tone, the minutes cautioned that "there was merit in waiting to see how indicators of how the economy performed at the start of the year to help assess whether or not the decline in GDP in the fourth quarter presaged sustained economic weakness".