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Last Updated: Wednesday, 18 February, 2004, 10:42 GMT
Bank vote unanimous on rate rise
Members mulled the inflationary effects of the strong pound
All nine members of the Bank of England's Monetary Policy Committee (MPC) voted to raise UK interest rates, minutes from their latest meeting show.

Members agreed earlier this month that prospects for the global and domestic economy had improved and were likely to fuel future inflationary pressures.

The MPC thought that a rise, the second in three months, was needed to ensure inflation would hit its 2.0% target.

The cost of borrowing was raised by a quarter-point in February to 4%.

Sterling question

According to the minutes, members agreed that "it would be appropriate in the light of prospective demand growth to withdraw some of the stimulus that the monetary policy stance was currently giving the economy".

However, while the committee unanimously agreed on the need for an interest rate rise, there were some differences over the impact of the recent rises in the pound.

Some members thought it best to consider sterling's rise since November as a one-off effect on inflation, which could be disregarded when setting interest rates.

They argued the stronger pound should only become a factor if it started to affect wages and price-setting behaviour.

Since the two day meeting, which concluded on 5 February, the pound has risen above $1.90 - the first time it has done so since Black Wednesday in September 1992, when the currency was ejected from the European Exchange Rate Mechanism.

The MPC also agreed that a rise in the cost of borrowing was consistent with a "cautious approach" to setting policy, especially in the light of uncertainty about household debt levels.




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