Sterling jumps as rate rise support grows at Bank of England

There has been an unexpected leap in the number of Bank of England policymakers supporting a rise in interest rates, as inflation soars above target.

It was believed the monetary policy committee (MPC) would vote 7-1 to maintain Bank rate at its post-Brexit vote level of 0.25%.

But a 5-3 split was revealed – with external members Ian McCafferty and Michael Saunders joining rate rise advocate Kristin Forbes in supporting an increase, back to its post-crisis level of 0.5%.

It was the closest the MPC has come to supporting a rise since 2007 because it currently has only 8 members after Charlotte Hogg quit in March and is yet to be replaced.

In the minutes of the rate-setting meeting, the Bank said it now expected inflation to exceed 3% by the autumn – higher than it had forecast a month ago – having reached an annual rate of 2.9% in May.

The Bank has previously signalled it is prepared to tolerate an overshoot of its 2% inflation target because to raise rates to help compensate would risk choking economic growth – slowing this year after the Brexit vote.

The MPC’s vote reveals growing concern at the pace of price increases – largely a consequence of weaker sterling since the referendum, which has pushed up the cost of imported goods.

Sterling jumped a cent against the dollar to almost $1.28 after the vote revelation.

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