Bank of England unlikely to raise interest rates in near future

Earlier this month the Bank of England's Monetary Policy Committee decided to keep interest rates on hold at 0.5%, and minutes released from the meeting suggest that a rise is unlikely in the near term.

The MPC said that business surveys suggested "continued modest underlying economic growth in the second quarter", but some softening in the outlook for the third quarter for both manufacturing and services.

The minutes state that there is a "substantial" risk posed by an escalation of the eurozone debt crisis, and that "the funding costs faced by the major UK banks remained elevated… and were likely to continue to affect the price and availability of credit to many households and businesses adversely."

On 7 July the nine-man committee voted seven to two in favour of holding rates at 0.5%. Spencer Dale and Martin Weale voted to raise them to 0.75%. Both men had voted to raise rates in each meeting from February to May, along with Andrew Sentance.

However, Sentance, the most aggressive member, who voted to raise rates to 1%, has since been replaced on the MPC by Ben Broadbent, a former Goldman Sachs economist. Broadbent voted to hold rates in June and July.

The British Chambers of Commerce has encouraged the MPC to hold interest rates. David Kern, chief economist at the BCC, said: "With wage pressures remaining modest, and with businesses and consumers facing acute pressures, it is right to wait before raising rates.

"At present, only one member of the committee [Adam Posen] has voted for increasing the quantitative easing programme, but if the economy continues to shows sign of weakness in the next few months, the MPC should consider this option more seriously to avoid a setback."