BOE Minutes Show Divided MPC 7-2

Persistently low inflation prompted a majority of members on the Bank of England’s Monetary Policy Committee to keep interest rates on hold.

Seven members voted to keep rates at 0.5%, while two wanted a rise to 0.75%.

The minutes of the November meeting showed that Ian McCafferty and Martin Weale again voted for an increase.

The minutes said that there had been a “material spread of views” on the committee on the risks to the outlook for inflation.

“For most members, the outlook for inflation in the medium term justified maintaining the current stance of monetary policy,” the minutes stated.

There had been some market speculation that either Mr McCafferty or Mr Weale would stop voting for an immediate rise in rates, which they have done since August.

Sterling rose by half a cent to $1.5648 and strengthened against the euro after the minutes were released.

The minutes stated: “Below-target inflation was judged to be partly the consequence of a margin of spare capacity bearing down on domestic costs and prices.

“A prolonged period in which inflation was below the target created at least the possibility that medium-term expectations of inflation would begin to drift downwards. This had the potential to lengthen the period for which inflation itself would remain below 2%.”

Inflation rose to an annual rate of 1.3% in October, up from 1.2% in the previous month, official figures released on Tuesday showed. The Bank aims to maintain inflation at 2%.

via BBC

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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