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BoE divided over interest rates

Four members of the Bank's Monetary Policy Committee voted for a quarter-point rise in June, including Bank of England Governor Mervyn King.

The tight vote may increase the chances of further rate rises, analysts said.

It is only the second time that the governor has been on the losing side of the Bank's monthly rate decision.

Interest rates are currently at 5.5% after four increases since last August in an attempt to rein in inflation.

Consumer price inflation fell to 2.5% last month from 2.8% in April, but it remains above the government's 2% target.

Mr King was joined in opposing this month's rate freeze by Deputy Governor John Gieve, and committee members Tim Beasley and Andrew Sentence.

They were outvoted by the remaining five members, including Deputy Governor Rachel Lomax and chief economist Charles Bean.

Analysts had predicted that the vote split at May's meeting was likely to have been 7-2 in favour of a freeze.

"The Bank of England has put the markets on notice to batten down the hatches for a July rate hike," said Dave Brown, chief European economist at Bear Stearns.

"It was not just the close vote - 5-4 - but the fact that King threw his weight behind calls for a hike in June that shrieks out higher rates ahead."

Possible commentaries that could be written on this article

In this article there is a lot of reference made to new changes in Britains interest rate. Possible article commentaries could involve the need for Britains Central Bank to be independent from the government. The reason for this being that if the government and the Central Bank aren't independent then the government is under temptation to overprint money to finance its debt or lower the interest rate in times where due to creeping inflation (in Britain inflation had earlier in the year reached 3%) the best policy to pursue would be a tight monetary policy with higher interest rates. Another idea for a commentary could be an assessment of the pros and cons of increasing interest rates in times of expected high inflation as well as the impact of high interest rates in the economy. This could be used as an explanation for the 4 to 5 vote on keeping interest rates on hold and could be used as proof that the pros and cons are pretty much equal in terms of their economic impact. The above is a good illustration of the opportunity costs faced by economists when trying to administer policy.