BackBOE officials seen splitting on rates for first time this year
While key interest rate is forecast to stay at 0.5%, economists say at least two of nine MPC members will vote for tightening next week
Premium
London: The Bank of England (BOE) is about to move one step closer to an interest-rate increase as policymakers’ warnings on the risks to inflation harden into votes.
While the key interest rate is forecast to stay at 0.5%, a majority of economists surveyed by Bloomberg News say that at least two of the nine-member monetary policy committee (MPC) will vote for tightening next week. Both the decision and the votes will be published simultaneously on 6 August in London as part of a new communications format under governor Mark Carney.
The MPC are meeting against a backdrop of accelerating wage growth and the longest streak of continued economic expansion since before the recession that started in 2008. External headwinds over which the country has little control, including weakness in Europe and China, along with the strength of sterling, may stay the majority’s hand for now.
“We have some members of the MPC who have over the last few months been rather hawkish," said George Buckley, an economist at Deutsche Bank AG in London, who predicts one or two MPC members will vote for an increase. “It’s very difficult to see a lot of members voting for a hike, especially with China on the cards as well."
MPC members Martin Weale and Ian McCafferty are seen by economists as the most likely to vote for a rate increase. They were pushing for tightening last year, before dropping their call in January as inflation tumbled. There has even been a broader shift within the panel in recent weeks, with Carney saying the time for tightening is approaching.
Negative for inflation
Under the new format, 6 August will also see the publication of the minutes of the MPC meeting and its quarterly economic forecasts, including the key medium-term inflation outlook.
Consumer prices stagnated in June, and Buckley said that at the moment, “everything is negative for inflation," citing the strength of sterling, 10-year gilt yields and commodity prices. The BOE’s effective exchange rate is up about 4% in the past three months.
“With inflation set to hover around zero for most of the rest of this year and productivity picking up, we still think that the MPC can wait until around the second quarter next year before raising bank rate," said Paul Hollingsworth, an economist at Capital Economics in London. Bloomberg
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
