MPC divided despite 9-0 vote
From August to December Martin Weale and Ian McCafferty voted to raise the base rate to 0.75%, but with CPI inflation rapidly dropping to 0.3% in January they voted to keep rates on hold.
However the minutes read: “For two members, the immediate policy decision remained finely balanced: given the outlook for inflation beyond the short-term, there could well be a case for an increase in bank rate later in the year.
“All members viewed it as more likely than not that bank rate would increase over the next three years; for one member, the next change in the stance of monetary policy was roughly as likely to be a loosening as a tightening.”
Vicky Redwood, chief UK economist at Capital Economics, said: “The minutes of this month’s MPC meeting published this morning show that the Committee is more divided about the next move in interest rates than the unanimous vote would suggest.
“In particular, the two members (Martin Weale and Ian McCafferty) who recently dropped their call for a rate hike seem to be not far off reinstating it, while for one member (presumably David Miles) the next move in policy was as likely to be a loosening as a tightening.”
This morning the Office for National Statistics revealed that annual growth of average earnings increased from 1.9% to 2.4% in December in its labour market statistics.
Redwood added: “We still think that pay growth will continue to accelerate as the labour market tightens, meaning that an interest rate rise this year remains a possibility.”