A trio of Bank of England officials broke ranks with their colleagues in June to push for an immediate increase in interest rates, one of several signals that the U.K. central bank has moved a step closer to withdrawing the emergency stimulus it put in place after last year's Brexit referendum.
The BOE said Thursday that a majority of officials voted to hold the central bank's benchmark interest rate steady this month at 0.25% but minutes of the Monetary Policy Committee's discussions showed officials are growing increasingly anxious about quickening inflation.
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For three MPC members-- Kristin Forbes, Ian McCafferty and Michael Saunders--intensifying inflationary pressures justified an immediate increase in the BOE's benchmark rate to 0.5%, a move that would reverse the quarter-point cut implemented in August.
The remaining five members of the panel, including Gov. Mark Carney, voted to stay put for now, citing uncertainty over the outlook for growth, the minutes record. One seat on the nine-member panel is currently vacant following the departure in February of deputy governor Minouche Shafik.
All eight officials agreed, though, that their tolerance for rising inflation is wearing thin. Officials had previously said they were prepared to tolerate a burst of rapid price-growth to keep the economy on an even keel as the U.K. began exit talks with the European Union.
But the minutes record their unease after annual inflation accelerated to 2.9% in May, well in excess of the BOE's 2% goal and the bank's own forecasts. They also noted the economy appeared poised to recover somewhat in the second quarter after a soft start to the year and that the labor market remained healthy.
"Overall, the degree of spare capacity in the economy appeared limited, but, at the same time, the inflation overshoot relative to the target could be more pronounced than previously thought," the minutes record.
With inflation accelerating and promising signals on growth, "there were arguments in favor of a moderate tightening in monetary policy," the MPC said.
The minutes of June's meeting contained other signals that officials are adopting a more hawkish stance on borrowing costs. A statement included as recently as May that interest rates could be cut as well as raised was dropped. Officials noted that domestic inflationary pressures in the British economy appeared to be intensifying. And they sounded upbeat on the prospects for exports and business investment to power growth while squeezed consumers take a breather.
The minutes made no reference to last week's election in the U.K., which cost Prime Minister Theresa May her Parliamentary majority. The surprise result has raised doubts about Mrs. May's future as leader and her government's Brexit strategy.
Mr. Carney is due to speak alongside U.K. Treasury chief Philip Hammond later Thursday at an annual gathering of bankers in London's financial district.
Write to Jason Douglas at email@example.com and Wiktor Szary at Wiktor.Szary@wsj.com
(END) Dow Jones Newswires
June 15, 2017 07:27 ET (11:27 GMT)