Two of the MPC members, Ian MacCafferty and Martin Weale, see that economic circumstances are sufficient to justify a rate hike by 25 bps, according to the MPC minutes from the 6-7 August.
The minutes stated that “In the view of some members, the degree of spare capacity had diminished sufficiently that, although some slack still remained, exactly how much was uncertain enough that estimates of it were becoming a somewhat less informative guide to the appropriate future path of monetary policy”.
For most members, however, there is insufficient evidence of inflationary pressure to justify an increase in the rates. As expected the focus remains on the degree of spare capacity in the economy, weak wage growth and inflation outlook. The Committee votedunanimously to keep the issuance of central bank reserves at £375 billion.
We stick to our forecast on a first rate hike in Q2 2015 due to subdued inflation outlook and tightening macro-prudential policy.
Nordea