BoE Minutes Show 7-2 Divide on Rates

Two members of the Bank of England’s interest rate setting committee maintained a hawkish stance on interest rates this month and voted for a second time to raise rates.

The nine-strong monetary policy committee (MPC), which meets every month to set the central bank’s base rates, voted at their September gathering to maintain the lowest rates in British history at 0.5%, according to minutes of the gathering.

Martin Weale and Ian McCafferty, both external members of the committee, pushed for a 50% jump to 0.75% in response to lower unemployment and a tightening labour market.

But the remaining seven, including the Bank of England governor Mark Carney, agreed that the failure of wages to rise above the rate of inflation meant there was little domestic pressure on prices over the next couple of years.

Analysts said recent data on pay and inflation showed the UK recovery remained fragile. Ben Brettell, senior economist at financial advisers Hargreaves Lansdown, said: “In the absence of inflationary pressures, leaving rates on hold is a fairly straightforward decision, and it is no surprise that mpc members McCafferty and Weale remain alone in calling for an increase to 0.75%.

“With CPI inflation at a five-year low, and set to remain significantly below target well into 2015, the first move won’t come until after next year’s election.”

Average annual pay rose by only 0.7% in the three months to July excluding bonuses while inflation in the same month stood at 1.6% – and fell further to 1.5% in August.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza