The Bank of England’s monetary policy committee voted 9-0 to keep interest rates on hold at 5.75% this month.
In the minutes of the August 1-2 rate-setting meeting, published this morning, MPC members agreed that it was too early to be confident of the effect of five rate hikes in the past year and emphasised that they had ‘no firm view on whether rates would need to rise further’.
At the time of the meeting, the Bank did not have access to July’s CPI data (out yesterday) which showed a surprise fall to 1.9%.
In the light of the inflation data and today’s minutes – showing the first unanimous vote since May – many analysts are suggesting that there will be no rate hikes in the short term. As such, the pound fell and interest rate future had risen in London this morning.
But as John Stepek’s wrote in today’s Money Morning, the July inflation data doesn’t necessarily mean further rate hikes can be averted in the near future. (See: Has the inflation monster been slain already?)
Softening in some UK consumption indicators may be due to monetary tightening, said the minutes, but could ‘simply [reflect] volatility – including unusual weather’. Underlying household spending remained resilient. The bank identified rising food and commodities prices as key risks.
However, concerns that falling unemployment could lead to increased wage demands will have been eased by today’s quarterly employment figures. The official report shows that although unemployment fell by 45,000 in the three months to June, average earnings grew at their slowest rate in three years – just 3.3%.