The BoE said its Monetary Policy Committee “voted by a majority of 8-1 to maintain Bank Rate at 0.5 percent“.
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The minutes were released along with the rate decision, rather than two weeks after that fact as normal procedure dictates, as part of the Bank’s so-called Super Thursday. – Reuters pic, August 6, 2015.The Bank of England pointed to a possible increase in interest rates early next year, after only one of its top policymakers backed an immediate move and the Bank forecast a slow pick-up in inflation from zero thanks to a strong pound. The central bank noted “the drag on import prices from the appreciation will continue to push down inflation for some time to come”, dialing back expectations for many that a rate rise could soon be on the cards.
According to the minutes, Mr McCafferty thought that there were risks “of a more significant overshoot of inflation following its return to the target”.
Ian McCafferty is the only member of BoE’s MPC to vote for an increase in August’s meeting.
Anna Leach, head of economic analysis at the CBI, added, “Despite the (monetary) committee’s relatively unified decision to keep rates on hold, domestic demand has been stronger than the Bank expected in May”.
Investors will have to decide quickly if a split, and any signs that the dissent might grow in coming months, are balanced by a lower two-year outlook for inflation after a recent strengthening of sterling which will make imports cheaper. “Today’s decision and minutes have done little to alter financial market expectations that the first rise in Bank rate will not occur until 2016”. Both were expected to vote for a hike today, but Martin Weale left his fellow hawk high and dry.
Carney last month suggested rates could rise at “around the turn of this year” as the recovery strengthens.
Giving his inflation report, Carney said that the time for raising interest rates was drawing closer, but explained it would be the product of unpredictable economic developments. He argued February next year now represented the most likely timing of an interest rate rise.
“A combination of concerns over global growth, Chinese stock market worries and continued uncertainty over Greece all combined to persuade the MPC that growth prospects remain subdued”.
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“It will take some time for more MPC members to be persuaded higher rates are appropriate, in my view until spring next year at the earliest”.
