The BoE is now divided on monetary policy and its exit strategy is approaching. At the August MPC meeting two of the MPC members, McCafferty and Weale, voted for a rate hike by 25 bps. 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”.
Since the August Inflation report data has been mixed. There are signs of a slowdown in the housing market, still weak wage growth and inflation below target (1.6%). The manufacturing sector is slowing while the service and construction sectors strengthen. If anything, this support our view on a first rate hike in Q2 2015.
The MPC minutes will be published on Wednesday 17 September. Most interesting is to see if there are more members voting for a rate hike
Nordea