Two Bank of England officials voted August rate rise
Bank of England policymakers broke ranks over interest rates for the first time in three years this month, when two unexpectedly voted to tighten policy and revived speculation about a 2014 rate hike.
Former academic Martin Weale and business economist Ian McCafferty both voted to raise interest rates to 0.75 percent from 0.5 percent, according to minutes released on Wednesday of the nine-member Monetary Policy Committee’s meeting on Aug. 6-7.
Sterling rebounded from a four-month low and government bonds fell as expectations for an early rise in British interest rates were revived.
Last week, the BoE slashed its forecasts for wage growth for 2014 and said it did not want to raise rates until stronger wage rises looked imminent – a view shared by the majority of the MPC in Wednesday’s minutes.
But Weale and McCafferty believed recent declines in unemployment suggest wage growth could accelerate, and that the economy was running at close to capacity and rates needed to rise now.
Some economists doubted that other members of the MPC would soon follow suit.
“Historically, dissenting votes have signalled that a policy change is imminent no more than half of the time,” said economists at Fathom Consulting.
Moreover, economic data has swung against an early rate rise since August’s vote.
The MPC said it expected the case for a rate rise to strengthen as the economy recovered further.
“This, along with a continued improvement in credit conditions, would in time diminish the need for such a low level of Bank Rate,” the minutes said. ($1 = 0.6006 British Pounds)
Source: Reuters
