The Bank of England’s Monetary Policy Committee (MPC) voted unanimously in favour of keeping the Bank Rate at 0.5% at its recent meeting at the beginning of June.
The committee members were also unanimous in their decision to keep the level of quantitative easing at £375 billion.
The MPC said that overall, the developments since its previous meeting had been limited and, in the main, consistent with the expectations that the committee had set out in its May Inflation Report. In light of that, all committee members agreed that it was appropriate to leave the stance of monetary policy unchanged at the meeting. For two members, the immediate policy decision remained finely balanced between voting to hold or raise Bank Rate.
Alex Lydall, senior trader at Foenix Partners, said: “With deflationary fears subsiding on yesterday’s CPI print – now back into positive territory at 0.1% (y/y) – MPC doves could be in minority sooner than expected despite the unanimous MPC vote today.
“The committee has already highlighted in prior meetings that opinions differ on wage growth and productivity, and the two ‘finely balanced’ members, McCafferty and Weale, could be ‘off the fence’ in coming months and voting in favour of a hike.
“Carney will likely be quick to point out the upside of inflation forecasts in future meetings and interest around rates will follow, with the market likely to start speculating as to when exactly in 2016 rates will rise. With Carney noting projections for inflation will rise more sharply than previously forecast, the step back into positive territory could deem a significant start to the balance in power shifting quickly towards the hawkish members.”