Here’s a quick round-up of analysts’ reaction, after minutes released from the Bank of England’s August monetary policy committee meeting revealed that two of the MPC’s nine members voted to hike interest rates - the first policy split on rate hike timing in more than three years:
Martin Weale and Ian McCafferty both voted to increase the benchmark rate by 25 basis points, while the other seven members of the MPC voted to keep rates on hold:
From Marc Ostwald, strategist at ADM Securities: “Weale and McCafferty were in effect arguing that relatively benign CPI forecasts should be overlooked, given that growth is robust and self-sustaining, and if the MPC wishes to be gradualist, then it would be better to go now to facilitate a shallow gradient to the rate hike path trajectory.”
From James Knightley at ING: “We suspect that Weale and McCafferty will remain in the minority for a while yet.
“Low inflation numbers, the lack of wage growth and concerns about eurozone growth, suggest that in the absence of upside activity data shocks the majority will continue to opt for the status quo in the next few months.”
From Alex Edwards, head of the corporate desk at UKForex: “Most MPC members found that there weren’t sufficient inflation pressures to justify hiking interest rates just yet; this argument is now firmly backed by yesterday’s consumer price index data.
“Most members also want to see more evidence of wage growth before raising rates, and so despite the surprise vote, yesterday’s inflation data is dampening the positive impact on the pound. It will also, no doubt, send a confusing message to investors, households and business owners as to when to expect the next rate rise.
“Yesterday’s inflation figures indicate that this could happen next year, but these recent minutes might suggest it could be before the New Year.”
