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Leaders of Alabama’s most populous county voted unanimously Friday to reject a settlement with Wall Street creditors to pay off more than $3.1 billion in debt and bought more time to avoid what would be the largest municipal bankruptcy ever filed.

The five members of the Jefferson County Commission also unanimously approved a resolution to give the commission president and finance chair until Sept. 16 to personally negotiate a deal.

The county has been trying to avoid filing bankruptcy over more than $3.1 billion in sewer system debt for three years. Its problems stem from a mix of outdated sewer pipes, the economy, court rulings and public corruption.

State officials and a court-appointed receiver have been closely involved in the negotiations. Republican Gov. Robert Bentley’s chief of staff, David Perry, attended Friday’s meeting.

Perry said a Chapter 9 bankruptcy proceeding was still a possibility but “a general framework for a deal is in place.”

Perry said Bentley and legislative leaders would get personally involved to make sure any needed legialtion passes if county officials can work out a deal.

“The county and creditors do not have a definitive deal in place yet but they have a conceptual framework that keeps sewer rate increases at a minimum and resolves the problem once and for all for the county,” the governor said in a statement.

Commissioner Jimmie Stephens, who oversee the county’s finances, said members thought they could get a better deal in bankruptcy court than was offered by lenders.

“That’s the reason we didn’t accept the creditors’ offer,” he said.

The main problem is some $3.14 billion in sewer debt. The total value of the bankruptcy would exceed $4.1 billion once the county’s debts for schools and other projects are included, officials said.

Commissioners sharply criticized the settlement proposal by Wall Street, which would have resulted in rate increases of almost 25 percent within 18 months and additional, single-digit rate hikes for as long as 40 years. Creditors would have forgiven more than $1 billion in debt and the county would have refinanced $2.3 billion, which would be used to pay off old debts, create a $233 million reserve and cover more than $23 million in issuance costs.

The settlement also would have resulted in dismissal of litigation including the county’s lawsuit against JPMorgan over deals that helped lead to the debt. Commissioners said all those cases should go forward and criminal investigations into the debacle should continue.

“There are still bad people out there,” Commissioner Sandra Little Brown said.

State lawmakers would have to approve legislation to put key parts of any agreement in place and commissioners said the governor had asked for additional time to work with lawmakers building support. But Stephens said he was skeptical, particularly because the Legislature this year failed to approve bills needed to fix other problems in the county’s operating budget cash advance now.

Jefferson County has about 658,000 residents and is home to both Alabama’s largest city, Birmingham, and its medical and financial centers. A bankruptcy filing by Jefferson County would far exceed the current record for a municipal bankruptcy, set 17 years ago by Orange County, Calif.

Jefferson County resident David Roebuck, 25, said the financial debacle was disappointing, and he fears it will tarnish the area’s reputation for years.

“It’s embarrassing,” Roebuck said. “How are you going to attract new business or industry if the county isn’t being run very well?”

The county has been trying to avoid filing bankruptcy since 2008. It offered JPMorgan Chase & Co. and other creditors a deal that would have wiped out more than $1 billion of the sewer and led to sewer rate increases.

A court-appointed official last month recommended a 25 percent rate hike for sewer customers, whose average residential bill would increase by more than $9 a month to $46.88, calling it a necessary step toward financial viability, but it’s unclear what might happen to rates, county services and its workforce should leaders opt for bankruptcy.

Jefferson County financial woes result from a mix of outdated sewer pipes, the economy, court rulings and public corruption.

A federal court forced Jefferson County to begin a huge upgrade of its outdated and overwhelmed sewer system to meet federal clean-water standards in the ’90s, and officials used bonds to finance the improvements. Outside advisers suggested a series of complex deals with variable-rate interest that were later shown to be laced with bribes and influence-peddling.

Loan payments rose quickly because of increasing interest rates as global credit markets struggled, and the county could no longer afford its payments. Meanwhile, a string of elected officials, public employees and business people were convicted of rigging the transactions that helped put the county in so much trouble.

The sewer debt isn’t Jefferson County’s only problem, though. It already has laid off about 550 of its 2,300 workers and reduced government services because courts struck down an occupational tax and business license that provided more than $74 million annually for its operating budget. The county has closed satellite offices and reduced hours, and long benches now line a hall in the main courthouse where residents often have to wait hours for the simplest of transactions, like getting a new car tag.

Jefferson County’s bankruptcy filing would be nearly twice as large as the record one filed by Orange County, Calif., in 1994 over debts totaling $1.7 billion. Jefferson County officials have been consulting with one of the lawyers who worked on the Orange County bankruptcy.

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Debit cards, a gleam in bankers’ eyes 30 years ago, have become the preferred method for people to tap their bank accounts, a free and easy alternative to paper checks, live tellers or cash machines.

U.S. shoppers used them 37 billion times last year, making them more popular than credit cards (19 billion transactions) and checks (18 billion), according to the newsletter Nilson Report. Another estimate puts the figure at 45 billion debits.

But big changes are afoot that could make it much more expensive for consumers to use the cards. For years, banks subsidized most debit card holders by levying heavy fees on retailers and overdrawn consumers. Merchants paid a processing fee averaging 44 cents every time a shopper swiped a card. And careless cardholders at major banks typically got dinged $35 every time the bank covered an overdraft my credit score.

Last year the nation’s banks collected more than $50 billion from merchant fees and overdrafts. That’s likely to decline, however, thanks to rules Congress mandated after the financial crisis. Starting next month, merchants will pay just 12 cents for debit processing, unless bank lobbyists persuade the Federal Reserve to tack on a surcharge for fraud prevention. Even then, the fee would probably not exceed 18 or 20 cents.

Banks stand to lose more than $10 billion a year in merchant fees and more than $6 billion in overdraft fees. They’ll be looking to make it up somewhere.

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Officials and business leaders are gathering in Joplin, Mo., today to announce a new fund aimed at expanding and attracting businesses in the aftermath of one of the nation’s deadliest tornadoes.

The new “Joplin Tomorrow” fund seeks to raise more than $10 million to spur commercial growth in the Joplin area after a powerful tornado killed more than 150 people and destroyed thousands of homes and businesses there on May 22.

The fund will provide low- and no-interest loans to businesses hoping to relocate to the Joplin region or expand there. Among the first gifts made to the fund was the Danforth Foundation’s May 27 donation of $500,000, its last donation before the foundation closed May 31 and formally ended the family’s 84-year history of philanthropy.

The Missouri Chamber of Commerce also donated $25,000 to the fund Payday advance.

The non-profit fund, which seeks to raise $10 million, asked former U.S. Sen. John Danforth for help raising money. Some of the money will be used to finance capital projects.

In a telephone interview Monday, Danforth said the new fund will supplement federal loan programs that focus on restorative efforts. Rather than just loaning money to restore what was lost, the fund seeks to expand businesses and lure new entrepreneurs to Joplin.

The fund’s long-term goal, Danforth said, is “to build something even better than what would have been the case had the disaster not occurred.”

The fund will work with the Joplin Area Chamber of Commerce to raise money. Five Joplin business leaders will serve on the fund’s board of directors:

U.S. applications for unemployment benefits fell slightly last week, according to fresh government data, but new claims remained at a level typically associated with subpar hiring trends.

The Labor Department on Thursday said 422,000 people nationwide requested jobless benefits in the week ended May 28. The prior week’s number was revised up to 428,000 from an originally reported 424,000.

Economists surveyed by MarketWatch had expected initial claims to decline to a seasonally adjusted 418,000.

The average of new claims over the past four weeks, considered a more accurate measure of employment trends, fell 14,000 to 425,500, the lowest level in more than a month. The rolling average smooths out week-to-week volatility in the data.

Initial claims, which fell to a three-year low of 375,000 in mid-February, have topped the 400,000 mark for eight straight weeks. Weekly applications for benefits usually fall well below 400,000 when the economy is strong and companies are hiring rapidly.

The weekly claims report, however, gives just a rough picture of the labor market because it tracks only the number of people who seek government benefits payday loan companies. The data do not take into account how many people got hired in an economy in which millions of Americans switch jobs every month.

Still, economists have viewed the recent uptick in claims and a string of other weak economic reports as a warning sign that hiring could throttle back after solid job growth in the first four months of 2011. Most predict that the economy added far fewer jobs in May than it did in April.

The MarketWatch survey of economists, for example, puts net job growth at 125,000 last month, down from a prior estimate of 170,000. By contrast, the U.S. added 244,000 jobs in April.

“The level of claims is consistent with very weak job gains, something we expect to be reflected in the May employment report,” said economist Julia Coronado of BNP Paribas. The government will release the May employment data today.

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A congressional agreement to increase the U.S. debt limit and reduce federal spending may take until August, the Republican chairman of the U.S. House Budget Committee said.

“I think there will be a deal. It will probably take a while,” Representative Paul Ryan, a Wisconsin Republican, said on NBC’s “Meet the Press” program. “We have to August.”

The U.S. Treasury Department has said Congress must raise the $14.3 trillion debt ceiling by Aug. 2 to avoid the government defaulting on its loans.

“Nobody wants default to happen, but at the same time we don’t want to rubber stamp just a debt-limit increase that shows we’re not getting our situation under control,” Ryan said.

Ryan defended a Republican budget plan that would cut spending by more than $6 trillion over a decade and privatize Medicare. The proposal would replace the traditional Medicare health-care system for the elderly with subsidies to buy private insurance starting with people who turn 65 in 2022.

“You cannot deal with this debt crisis unless you’re serious about entitlement reform,” Ryan said.

The plan passed the House of Representatives on April 15 on a 235-193 vote.

Gingrich Remark

Former House Speaker Newt Gingrich of Georgia, running for the Republican presidential nomination, said last week on the NBC “Meet the Press” program that Ryan’s Medicare plan represented “radical change,” a remark he then apologized for after receiving criticism within his party.

“His quote was deeply inaccurate,” Ryan said today of Gingrich’s comment. Ryan also said his proposal “is as sensible and gradual as it gets.”

Gingrich said today that he used “unfortunate language” in characterizing the budget plan, and that he would have voted for it as part of a process to overhaul Medicare.

“My point was really a larger one that neither party should impose on the American people something that they are deeply opposed to,” Gingrich said on the CBS “Face the Nation” program.

Senate Minority Leader Mitch McConnell, a Kentucky Republican, said today he won’t vote to raise the debt ceiling without a plan in place to curb the cost of Medicare and Medicaid, the health-care program for the poor.

Act Now

“We gotta act and we gotta act now,” McConnell said on the “Fox News Sunday” program. “The time to do it is in connection with the debt ceiling.”

McConnell gave few details on what he believed an agreement on the debt-limit issue that cuts spending should look like. It’s unlikely to be any several plans being considered in the Senate or Ryan’s proposal, he said.

Instead, McConnell said, a final plan will have to emerge from current deficit discussions among lawmakers and President Barack Obama’s administration that are being led by Vice President Joe Biden.

“None of these budgets are going to become law,” McConnell said. “The real action is down at the White House.”

The Obama administration is trying to eliminate Bush-era tax cuts for wealthy families and is seeking an additional $1 trillion in tax revenues from high-income families. House Speaker John Boehner, an Ohio Republican, has said tax increases should be off the table.

Negotiations

Biden is negotiating with a bipartisan group of lawmakers, while a separate group in the Senate is seeking a budget compromise. That group, known as the “Gang of Six,” was reduced to five after Senator Tom Coburn, an Oklahoma Republican, left the talks last week, citing an impasse over cuts to entitlement programs.

An agreement eventually will hinge on the coalescence of a swath of lawmakers from both parties, and not on negotiations by smaller groups of lawmakers, Senator Dick Durbin, an Illinois Democrat and Gang of Six member, said on CNN’s “State of the Union.”

“This is ultimately going to be a debate on the floor of some of the most important economic issues of our time,” Durbin said.

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Japan urged a power company Friday to suspend all three reactors at a coastal nuclear plant while a seawall and other structures are built to ensure a major earthquake or tsunami does not cause a second radiation crisis.

The move came as the government is conducting a safety review of all Japan’s 54 nuclear reactors after the Fukushima Dai-ichi nuclear plant was crippled by the March 11 earthquake and tsunami that left more than 25,000 people dead and missing on the northeast coast.

The Hamaoka nuclear plant just 110 yards (100 meters) off the Pacific coast in central Japan is the only one so far where the government has asked that operations be halted until the utility can implement safety measures.

Chubu Electric Power Co. did not immediately say if it would halt operations there, but Kyodo News Agency cited company sources as saying it would. Government officials estimate the work could last two years.

Prime Minister Naoto Kan said at a news conference Friday evening he requested the shutdown for safety reasons, citing experts’ forecast of a 90 percent probability of a quake with magnitude of 8.0 or higher striking central Japan within 30 years.

“It was a decision made after thoroughly considering people’s safety,” Kan told a news conference.

The government asked Chubu Electric to suspend two running reactors and a third already shut for a regular inspection at the plant in Shizuoka, 155 miles (250 kilometers) west of Tokyo.

“If an accident occurs at Hamaoka, it could create serious consequences,” Kan said.

Since the March 11 disasters, Chubu Electric has drawn up safety measures that include building a seawall nearly a mile (1.5 kilometers) long over the next two to three years.

“The height of the seawall is at least 12 meters. We have come up with this safety measure after the March quake and tsunami,” said Takanobu Yamada, an official at Chubu Electric.

The company also plans to erect concrete walls along 18 water pumps at the plant. Yamada said the walls aim to protect the pumps from damage from an earthquake and tsunami, and it will take a year or one and a half years to complete the construction.

The plant does not have a concrete sea barrier now, but sandhills between the ocean and the plant are about 32 to 50 feet (10 to 15 meters) high, according to the company. The seawall of at least 40 feet (12 meters) would be built between the sandhills and nuclear plant.

Trade Minister Banri Kaieda said the utility company should halt operating its nuclear reactors while implementing such safety measures.

“Until the company completes safety steps, it is inevitable that it should stop operating nuclear reactors,” Kaieda said.

Shizuoka governor Heita Kawakatsu called the government’s move “a wise decision.”

“I pay my respect for the decision. We must do our utmost to secure alternative sources of energy,” the governor said in a statement.

The plant serves around 16 million people in central Japan. Faced with a possible power crunch due to the shutdown, the prime minister sought public understanding.

“We will experience some power crunch for sure. But we can overcome this with public support and understanding,” Kan said.

The region powered by the plant includes Aichi, where Toyota Motor Corp.’s headquarters and an auto plant are located. Automakers and other industries have had troubles with supply lines, parts shortages and damage to plants in the region since the March 11 disaster.

The Fukushima Dai-ichi nuclear plant lost its power and cooling systems in the earthquake and tsunami, triggering fires, explosions and radiation leaks in the world’s second-worst nuclear accident.

Radiation leaks have forced 80,000 people living within a 12-mile (20-kilometer) radius of the plant to leave their homes. Many are staying in gymnasiums and community centers.

Residents in Shizuoka have long demanded suspension of the Hamaoka reactors.

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Conference call, anyone?

Several times a year, the lords of the global economy descend on the city of the moment. Their massive entourages fly business class, zoom around in motorcades and sleep at 5-star hotels. What do taxpayers funding all this summitry get in return? Ambiguous communiqués, hollow pledges and a nagging sense that world leaders should discover videoconferencing.

The latest summit of emerging-market stars is a case in point. As if the alphabet soup of G-7, G-8, G-20, APEC and OPEC weren’t enough, we now must follow BRICS events. In 2009 and 2010, they were just BRIC affairs: Brazil, Russia, India and China. This year, an “S” was awkwardly added for South Africa. Even Jim O’Neill, the Goldman Sachs economist who 10 years ago coined the acronym BRIC, doesn’t get why it’s there.

Far more deserving additions exist in Asia — South Korea and Indonesia. Yet the more I see what the BRICS are becoming, the more I think Seoul and Jakarta should decline any invite. BRICS confabs reinforce how artificial the whole enterprise is.

Take the bluster about a new world order. No one in their right mind would argue we don’t need one, yet the Group of 20 nations is a far more productive framework for any redesign of global markets and institutions. And each of the BRICS has a seat at the G-20 table.

Staging Sideshows

The trick is for emerging economies to demand a bigger voice there — not stage sideshows. That’s not to say economic groupings are pointless. In Asia, for example, the 10-member Association of Southeast Asian Nations is the only forum where the world can engage Myanmar’s repressive regime. Still, Asean is more about photo opportunities than substance.

The Asia-Pacific Economic Cooperation group is a circus. The only real thing its 21 members have in common is beachfront property. An APEC-wide free-trade zone would be a wonderful thing. On its watch, bilateral agreements, not sweeping international ones, became the norm. APEC gatherings are now Davos-like affairs. Like the World Economic Forum, they’re an excuse for corporate bigwigs to jet in and do deals. Rather than meeting in Hawaii in November, APEC leaders should call it in and reduce their carbon footprint.

Important topics were broached at the April 14 BRICS summit at the Chinese city of Sanya, including regulating derivatives and volatility in commodity prices. What it really highlighted is what really matters: the “C” in BRICS.

The group hasn’t moved beyond being about China’s voracious appetite for the commodities of the other four members, with a bit of America-bashing tossed in.

China’s Money

Brazil, Russia, India and South Africa are key economies in their own right, yet BRICS gatherings have evolved into the geopolitical equivalent of investment roadshows. China has piles of money, and the real action is on the sidelines of formal discussions. There, officials angle for more Chinese investment and access to the nation’s 1.3 billion consumers.

This dynamic offers some useful reality checks. For India, it’s realizing a trade deficit with China exceeding $20 billion annually will grow no matter how close Prime Minister Manmohan Singh sits to Chinese President Hu Jintao at the BRICS table. For Russia, it’s a one-time superpower being part of an emerging-nation group it doesn’t even lead. For Brazil, it’s how Latin America’s biggest economy weakened its trade defenses for a Chinese government unwilling to do the same. For South Africa, it’s that more will be expected of it on the progress front.

BRICS Brotherhood

As much as these economies must harness China’s 9.7 percent growth, they also need to protect domestic economies. Their currencies are rising while China works 24/7 to maintain an undervalued yuan. The trouble is, membership in the BRICS brotherhood makes it hard politically for officials in Brasilia, Moscow, New Delhi or Pretoria to criticize Beijing.

That’s why anger is being projected elsewhere. The U.S. deserves some for its hypocritical policies since the 2008 crisis. Back in 1997, when Asia blew up, America told the region to raise interest rates to support currencies, reduce debt, avoid blaming speculators for market swings and follow free- market policies. Today, the U.S. is doing exactly the opposite.

Yet big changes like replacing the dollar are better handled by the broader G-20. With over $4 trillion of combined currency reserves, any BRICS move to dump the dollar will shake markets. If you think the real, ruble, rupee, yuan or rand will replace the dollar anytime soon you’re dreaming. Even if the yuan emerged as a viable reserve currency, it first must be fully convertible. That’s a ways off.

Eclipsing U.S.

BRICS don’t want to live in a world run by Washington –not when their combined gross domestic product could eclipse the U.S. by the end of 2014. And it’s ridiculous that the governance of the International Monetary Fund and World Bank still rotates between the U.S. and Europe to the exclusion of the rest of the world.

The future clearly belongs to emerging nations. It’s just not clear that the BRICS as a political entity is evolving into something that can play a credible role in creating it.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

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A pair of thin robots on treads sent to explore buildings inside Japan’s crippled nuclear reactor came back Monday with disheartening news: Radiation levels are far too high for repair crews to go inside.

Nevertheless, officials remained hopeful they can stick to their freshly minted “roadmap” for cleaning up the radiation leak and stabilizing the Fukushima Dai-ichi plant by year’s end so they can begin returning tens of thousands of evacuees to their homes.

“Even I had expected high radioactivity in those areas. I’m sure (plant operator Tokyo Electric Power Co.) and other experts have factored in those figures when they compiled the roadmap,” Chief Cabinet Secretary Yukio Edano said.

Officials said Monday that radiation had spiked in a water tank in Unit 2 and contaminated water was discovered in other areas of the plant, underscoring the growing list of challenges facing TEPCO in cleaning up and containing the radiation. They also described in more detail the damage to fuel in three troubled reactors, saying pellets had melted.

Angry at the slow response to the nuclear crisis and to the catastrophic earthquake and tsunami that caused it, lawmakers tore into Prime Minister Naoto Kan.

“You should be bowing your head in apology. You clearly have no leadership at all,” Masashi Waki, a lawmaker from the opposition Liberal Democratic Party, shouted at Kan.

“I am sincerely apologizing for what has happened,” Kan said, stressing the government was doing all it could to handle the unprecedented disasters.

TEPCO’s president, Masataka Shimizu, appeared ill at ease as lawmakers heckled and taunted him.

Workers have not been able to enter the reactor buildings at the stricken plant since the first days after the cooling systems were wrecked by the March 11 earthquake and tsunami that left more than 27,000 people dead or missing. Hydrogen explosions in both buildings in the first few days destroyed their roofs and scattered radioactive debris.

On Sunday, a plant worker opened an outer door to one of the buildings and two Packbots, which resemble drafting lamps on tank-like treads, entered. After the worker closed the door, one robot opened an inner door and both rolled inside to take readings for temperature, pressure and radioactivity. They later entered a second building.

The robots reported radioactivity readings of up to 49 millisieverts per hour inside Unit 1 and up to 57 inside Unit 3, levels too high for workers to realistically enter.

“It’s a harsh environment for humans to work inside,” said Hidehiko Nishiyama of Japan’s Nuclear and Industrial Safety Agency.

Japanese authorities more than doubled the legal limit for nuclear workers since the crisis began to 250 millisieverts a year. Workers in the U.S. nuclear industry are allowed an upper limit of 50 millisieverts per year. Doctors say radiation sickness sets in at 1,000 millisieverts and includes nausea and vomiting cash till payday advance.

The robots, made by Bedford, Massachusetts, company iRobot, which also makes the Roomba vacuum cleaner, explored Unit 2 on Monday, but TEPCO officials had yet to analyze that data.

The radioactivity must be reduced, possibly with the removal of contaminated debris and stagnant water, before repair crews would be allowed inside, said NISA official Masataka Yoshizawa.

Sturdier robots can remove some of the debris, but workers are needed to test the integrity of the equipment and carry out electrical repairs needed to restore the cooling systems as called for in the road map, Yoshizawa said.

“What robots can do is limited, so eventually, people must enter the buildings,” TEPCO official Takeshi Makigami said.

The robots, along with remote-controlled miniature drones, have enabled TEPCO to photograph and take measurements of conditions in and around the plant while minimizing workers’ exposure to radiation and other hazards.

Separately, readings from a water tank attached to the spent fuel pool in Unit 2 showed a severe spike in radiation that NISA officials said might have been caused by the escape of radioactive vapor from a nearby containment vessel. They said, however, the possibility of damage to spent fuel rods could not be ruled out.

NISA also sent a report to the government watchdog Nuclear Safety Commission, saying that some fuel pellets and rods in the reactors in Units 1, 2 and 3 had become overheated and melted, the first time it had provided details of the damage to the fuel. Nishiyama, said the agency can only say “more than 3 percent” of the fuel rods have melted.

A pool of stagnant radioactive water was also discovered in the basement of Unit 4.

With evacuees’ ordeal stretching into the long-term, some began moving out of school gymnasiums into temporary housing. Hundreds who have not found apartments or relatives to take them in began filling up inns at hot springs.

“The government has asked us to be ready to take in as many as 200 evacuees for the next four months at least,” said Masaki Hata, whose family has run the Yoshikawaya Hot Springs Inn on the outskirts of Fukushima for seven generations.

Michiaki Niitsuma, a 27-year-old office worker, said he was glad to have a comfortable place to stay while he waited to go home.

“My kids got sick in the shelter. It was cold. It’s much better here. It’s a relief,” he said.

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Associated Press writers Eric Talmadge in Fukushima and Noriko Kitano in Tokyo contributed to this report.

(This version CORRECTS in paragraphs 4 and 19 that officials believe rise in radiation is from release of vapor.)

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Malaysia’s biggest automaker Perodua says its production of cars is being disrupted by a shortage of parts from Japan following last month’s earthquake and tsunami.

Perodua, which is partly owned by Japan’s Daihatsu Motor Corp., says “adjustments” have been made to ensure inventories last until May. It wouldn’t elaborate.

In a statement Thursday, the compact car maker said it was in talks with Daihatsu and other vendors to resolve the problem, which it described as a “temporary setback fast payday loan no faxing.”

The disruption has already led Perodua to delay the launch of a new car to the second half of the year.

It faces pressure to introduce new models to bolster sales and maintain leadership in Southeast Asia’s largest passenger car market amid competition from domestic rival Proton.

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Bank of England policy makers voted 6-3 to keep interest rates on hold this month and saw “merit in waiting” to assess the impact of rising oil prices on inflation, which they forecast may exceed 5 percent.

Andrew Sentance maintained his call for an increase in the benchmark interest rate to 1 percent from a record low of 0.5 percent, while Martin Weale and Spencer Dale wanted a move to 0.75 percent. The remaining six members, including Governor Mervyn King, voted to maintain the current level. Adam Posen kept up his push to expand stimulus with further bond purchases.

“It was not yet clear that the weakness in output growth seen in the latter part of 2010 would prove temporary,” according to the minutes of the March 10 decision published today in London. “The uncertainty created by both developments in the oil market and the recent indicators of household spending and confidence meant there remained merit in waiting to see how those factors evolved before altering the stance of monetary policy.”

Among the majority of members who voted to hold the rate, there were “differences of view” on the “risks associated with an increase in inflation expectations materializing.”

“Some thought that this risk remained limited given that the near term outlook for inflation could be explained by reference to changes in energy and other commodity prices, VAT and the sterling exchange rate,” the minutes said. “Others thought that this risk had risen, given further upward revisions to the near term outlook for inflation, and that the case for an increase in bank rate had strengthened in recent months.”

Significant Risk

The pound fell almost 0.4 percent today, and traded at $1.6302 as of 9.54 a.m. in London. Bonds rose, with the yield on the 10-year gilt slipping 3 basis points to 3.57 percent.

“If they really want to look through all the volatility they may decide to wait for more activity in the second quarter before moving, and that makes August more likely,” said David Tinsley, an economist at National Australia Bank in London and a former central bank official. “We do rule out, more or less, an April move but a May movement is still on the cards.”

Britain’s inflation rate rose to 4.4 percent in February, more than twice the central bank’s target, and the Monetary Policy Committee sees a “significant risk” it may increase to above 5 percent in the near term. As policy makers try to balance price risks against the threat to the recovery from the government’s budget squeeze, they also have to weigh the potential impact of the March 11 earthquake in Japan and the Middle East turmoil on the global economy and commodity prices.

Oil Prices

Crude oil prices have risen almost 40 percent in the last six months on concern that turmoil in Libya and other nations may curtail shipments from the Middle East. Corn has gained 30 percent in that period.

For the three members voting for an interest-rate increase, the “near term outlook for inflation had deteriorated further,” adding to “the risk of the perception arising that the committee was more prepared to tolerate persistent deviations of inflation from the target than in the past.”

On the bond plan, the MPC voted 8-1 to keep it at 200 billion pounds ($326 billion). Adam Posen kept up his vote to expand it to 250 billion pounds. Still, he noted risks to inflation, according to the minutes.

He “recognized the risk that a sustained upward trend in medium term inflation expectations or global price pressures could outweigh the forces pushing down on inflation, but did not see this risk as material,” the minutes said.

BOE Debate

Sentance said in a speech yesterday that U.K. policy makers are facing decisions that are “much less straightforward than they appeared to be before the financial crisis.”

King said on March 1 that increasing the key rate to make a gesture in the fight against inflation would be “self- defeating.”

“I don’t believe we’ve yet seen significant evidence of a pickup in medium-term inflation expectations,” he said. Still, it’s “reasonable to believe that if we continue to experience above-target inflation for long enough there could be an upside risk to inflation expectations.”

The economy shrank 0.6 percent in the fourth quarter and the recovery is at risk as Chancellor of the Exchequer implements a spending squeeze to reduce the record budget deficit. Osborne will announce his budget for the fiscal year through March 2012 at 12:30 p.m. today.

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