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MPC minutes reveal two members voted for August rate hike

Anna Federova
Written By:
Anna Federova
Posted:
Updated:
18/02/2015

Two members of the Bank of England’s Monetary Policy Committee voted for a 25bps rate hike this month, latest minutes show – the first call for a hike in over three years.

The vote to hike the Bank of England interest rate was divided for the first time since July 2011, with seven members voting to keep rates on hold and two voting for a small increase.

The minutes show that MPC members Ian McCafferty and Martin Weale both argued for an immediate increase in the bank rate from a record low level of 0.5 per cent.

However, the majority of members, including governor Mark Carney, remain cautious, saying there is insufficient evidence of inflation to justify an immediate hike in rates.

The meeting minutes published this morning state: “For two members, in particular, economic circumstances were sufficient to justify an immediate rise in bank rate.

“These members noted that the continuing rapid fall in unemployment alongside survey evidence of tightening in the labour market created a prospect that wage growth would pick up.”

The meeting was held before the release of August data showing a drop in CPI inflation from 1.9 per cent to 1.6 per cent, seen as easing pressure on policymakers.

Sterling, which had been under pressure in recent days, rose 0.3 per cent against the dollar to $1.664 in response.

Capital Economics said this morning’s release suggest that “it would be foolish to rule out the possibility of a 2014 rate hike”, but said low inflation may yet make its influence felt.

“Even if the committee decides to get on the front foot and raise interest rates before the end of the year, low inflation should ensure that the pace at which they rise is extremely gradual by historical standards,” said senior UK economist Samuel Tombs.

 


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