Daily Management Review

Bank Of England Minutes Hint Rise In UK Rates Even As It Stays On Hold For Now


03/23/2018




Bank Of England Minutes Hint Rise In UK Rates Even As It Stays On Hold For Now
A voting for the possibility of rate hike saw two members of the monetary policy committee of the Bank of England (BoE) voted in favor of an immediate rise in interest rates which has sparked speculations that there would be a likely hike in borrowing rate in May this year by the BoE. 
 
The news that a quarter-point rise in the bank rate to 0.75%. was backed by Ian McCafferty and Michael Saunders at the BoE saw an uptick in Sterling on foreign exchanges.
 
City is convinced that an upward movement in the rate of interest is most likely because of the tone that was reflected in the minutes of the meeting in which votes to keep the rates unchanged was favored by the other seven members of the MPC.
 
While signaling concerns about rising earnings growth, there was still a chance that activity in late 2017 would be revised higher according to the MPC even though there was a modest 0.4 per cent growth in the economy in the last quarter of 2017.
 
“The unemployment rate remained low in the three months to January. The firming of shorter-term measures of wage growth in recent quarters and a range of survey indicators suggest pay growth will rise further in response to the tightening labour market,” the MPC said.
 
According to the minutes of the meeting, the MPC had not altered the view point that it had held last month when the BoE cited its quarterly inflation report and analyzed that the chances for increased demand would translate into the assumption that rates of interest had to be increased so that the economy is able to hold the annual inflation rate significantly near the 2 per cent benchmark that the bank had set for itself.
 
A correct time for making and assessment for the amount of domestic inflationary pressure was in May when the BoE would be unveiling its next assessment for the economic health, said the seven MPC members who favored no change in rates for the present. Most of the members of the committee preferred to play a wait and watch game because they believe that very little has changed since the last time they met in February.
 
There are upside risks of inflation because of the growth rate in pay and because of “widespread evidence” that spare capacity in the economy was largely used up, said McCafferty and Saunders.
 
“A modest tightening of monetary policy at this meeting could mitigate the risks from a more sustained period of above-target inflation that might ultimately necessitate a more abrupt change in policy and hence a greater adjustment in growth and employment”, the duo said according to the minutes.
 
(Source:www.theguardian.com)






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