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Bank of England interest rate rise expected sooner rather than later

Another vote has gone in favour of a rise in interest rates from Bank of England policymakers which indicates rates will increase from the lowest rates on record sooner rather than later.A rise in rat...

Another vote has gone in favour of a rise in interest rates from Bank of England policymakers which indicates rates will increase from the lowest rates on record sooner rather than later.

A rise in rates would effect consumers at each end of the finance market, increasing rates to borrowers on products including mortgages and loans, while hopefully bringing better rates to savers on accounts such as high interest  and .

Spencer Dale has joined two others -  Andrew Sentance and Martin Weale in supporting a rise, according to minutes taken from February's Monetary Policy Committee (MPC) meeting.

However, the remaining six MPC members have continued to vote against a rise, holding rates at 0.5%.

Concerns are growing around the recent hike in inflation, which was boosted by the increase in VAT and rising commodity prices.

Last month saw the Consumer Prices Index rise at an annual rate of 4%, which was double the Bank of England's official target.

Further support in favour of a rate rise highlights the increasing uncertainty among the MPC.

Mr Weale and Mr Dale both voted to increase rates by 0.25%, while Mr Sentance called for a 0.5% rise.

Paul Tucker - deputy governor of the Bank of England, made a public statement on monetary policy yesterday, stating that the MPC was up against a "real dilemma" in their decision of whether or not to raise interest rates.

Mr Tucker spoke about the policy on BBC Radio Bristol: "Our job is to bring inflation back to the 2% That's going to take us a little while and it means that we face a real dilemma in what to do about interest rates over the next few months".

"The question we face isn't to make a violent increase in interest rates, it's whether or not to take away just a little bit of the stimulus that we've been applying to the economy over the last few years. This is a delicate balance".

At the start of the week, Mr Weale said that although inflation had increased in recent months by temporary causes, he was concerned that people's expectations of future inflation may have been changed, making price rises self-perpetuating.

Speaking on the BBC Radio 4's World at One programmeArticle Search, he said: "If businesses and people bargaining for wages expect high rates of inflation then there's a risk that they may build those expectations into their current behaviour."

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