The End of An Era

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The MPC published the minutes from its July meeting today - unremarkable in that they confirm another unanimous decision to retain Bank Rate at 0.5%; but more notable as these will be the last set of minutes that come with a two week time delay following the announcement.

The minutes of the Bank of England’s monetary policy committee meeting on July 9 out today showed that, for the seventh consecutive month, all nine members voted to keep the BoE’s main refinancing rate at 0.5%. The transcript indicated that policymakers remain focused on domestic demand-driven inflation pressures, in particular, that the spare capacity in the labour market has continued to shrink. The sharp fall in crude oil prices earlier this year has pushed down inflation, with the annual rate recently hovering around 0%, but the central bankers think this drag will be temporary. The BoE targets an annual inflation rate of 2% in the medium-term, that is, in one to three years’ time.

The BoE’s main rate has been at a record-low 0.5% since March 2009 but the minutes of July’s meeting, along with recent comments by bank Governor Mark Carney, suggest it will start to rise early next year.

The release of July’s minutes marks the end of an era because, for the last time in about two decades, they are out two weeks after the monetary policy announcement. From August, the announcement and publication of the minutes will be simultaneous. Also, in the second month of every quarter, the BoE’s Inflation Report (which contains the bank’s updated economic and inflation forecasts) will be released on the same day as the announcement and minutes. Up until now, the Inflation Report was provided to members at the meeting while the public had to wait a week to see it. The changes aims to improve the transparency of the BoE’s decision making, which should reduce uncertainty about the rationale underlying the committee’s thinking.

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