One of the last unanimous votes for the MPC - EY ITEM Club comments

23 July 2014

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  • The unanimous vote in July will be one of the last…
  • …as diverging views and increased uncertainty leave the MPC on a more hawkish steer
  • On balance, we expect the first rate hike in early-2015

John Bulford, economic advisor to the EY ITEM Club, comments on today’s MPC minutes:

“With inflation expected to remain under the 2% target for some time and wages growing at a snail’s pace, no member would have felt the time was right to start tightening policy.

“The MPC has reached a cross roads, and next month’s inflation report should give us a much clearer picture of the road the MPC will go down. In contrast to the previous inflation report, which signalled that interest rates would remain on hold for some time, the inflation report in August will be a lot more balanced in its conclusions. The Bank’s estimate of slack will almost certainly have narrowed, although this will be accompanied with a greater degree of uncertainty. Overall, this should result in a more hawkish steer.

“The MPC will ultimately make its decision with a heavy nod towards where wage growth is headed, rather than where it has been. With this in mind, it looks likely that the first rate hike will come in early 2015, a little later than markets currently anticipate.”