The Bank of England’s Monetary Policy Committee (MPC) has voted by a majority of 7-2 to keep UK interest rates at the present level of 0.5 per cent.
The decision was widely expected, but with retail sales figures released this morning (22 March) being much more positive than expected, rising wages, and upgrades to GDP forecasts announced by the Office for Budget Responsibility (OBR) this month, interest rates are widely expected to rise in May.
Retail sales grew by 0.8 per cent in February, having fallen by 0.2 per cent in January.
Two members of the Bank of England rate setting committee - Ian McCafferty and Michael Saunders - voted to put interest rates up this month.
Sterling has jumped to its highest level since June 2017 against the euro on the announcement, and to a seven week high against the dollar.
Ben Brettell, senior economist at Hargreaves Lansdown said that while the decision to leave interest rates unchanged was expected “what wasn’t expected was two committee members breaking consensus and voting for an immediate rise to 0.75 per cent".
"Ian McCafferty and Michael Saunders are worried that inaction now will mean rates will need to rise faster and further in future.”
Ben Edwards, who runs the BlackRock UK Corporate Bond fund said that while today’s vote indicates interest rates will rise in May, he feels economic uncertainty will preclude any further UK interest rate rises this year.
David.Thorpe@ft.com
