MPC sees split vote for the first time in three years - EY ITEM Club comments

20 August 2014

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  • MPC sees split vote for the first time in three years…
  • …but Weale and McCafferty are likely to remain in a minority for some time…
  • …with absence of inflationary pressures and risks of tightening policy set to push a rate hike into 2015

Martin Beck, senior economic advisor to the EY ITEM Club, comments on August’s MPC minutes:

“Today’s split vote does not change our view that a rate hike will have to wait until 2015. A minority of members appears to be supportive of a rate hike, but the absence of inflationary pressure and the risks involved in tightening policy make it difficult to see majority support for a hike emerging in the near future.

“Every relevant indicator remains subdued. CPI inflation fell further below target in July while the same month also saw producer input and output prices drop at the fastest annual rate in almost five years. What’s more, the latest Inflation Report showed that there has been little erosion in spare capacity in recent months, wage growth is at an exceptionally low level and inflation expectations among the public, companies and financial markets remain well anchored.

“Even that one fly in the monetary policy ointment – the heated housing market – has shown signs of cooling. Growth in the ONS measure of house prices eased a touch in June and recent survey data from RICS and Rightmove suggest that a slowdown is becoming particularly apparent in the bubbly London market.”

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