Wednesday’s release of the minutes of the Bank of England’s (BoE) Monetary Policy Committee (MPC) meeting saw a shift in how members regard the danger of inflation, as Martin Weale joined Andrew Sentance in voting for an increase of a quarter point this month. Sterling rose on the news, anticipating an increase earlier than previously expected, and gilts fell.

Even though the meeting was held prior to the release of England’s huge drop in GDP (the meeting was held 12-13 Jan.), indications are that the MPC is teetering toward a rate increase sooner rather than later. While the committee as a whole was considering a tighter monetary policy, the shift in voting on Weale’s part showed that sentiment is shifting.

Reuters reported that economists had not expected any change from the last meeting, when Andrew Sentance voted for a rate increase and Adam Posen favored more quantitative easing. Brian Hilliard, economist at Societe Generale, said in a statement, “The cracks are starting to appear in the MPC consensus. Not only did Weale vote for a rate increase, there's a hint that other members were teetering on the brink of doing that as well.”

There are fears among members that such a swift move to action would indicate a too-rapid move to contain inflation, with downside risks to a possible recovery of spare capacity, fiscal austerity, export problems due to the euro zone crisis, and tight credit conditions. According to the minutes, “Some members also noted that an increase in Bank Rate … might be misinterpreted as a signal that the Committee would attempt to bring inflation back to target excessively rapidly, which could cause expectations of a relatively sharp tightening of monetary policy that could have a detrimental impact.”