Given that the week ahead is looking fairly bare with regards to new data releases, we thought it would be better to take a closer look at last week’s MPC vote, and what we can induce from the minutes of the meeting.
MPC vote to keep interest rates on hold
On the face of it, last week’s meeting was a fairly dull affair, with the committee (now back to its full complement of 9 members) voting by 7-2 in favour of maintaining interest rates at their record low of 0.25%. No change here then…
However, diving into the minutes of the meeting, reveals a significantly more hawkish tone in wording, which we haven’t seen for some time, hinting that a rate rise could be just around the corner. Indeed, the following extract from the minutes would suggest a rate hike is likely to come as early as November:
"A majority of MPC members judged that, if the economy continued to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflationary pressure then, with the further lessening in the trade-off that this would imply, some withdrawal of monetary stimulus was likely to be appropriate over the coming months in order to return inflation sustainably to target.”
Markets appeared to take this at face value, with sterling rising to its highest level against the dollar since the Brexit vote last Friday, with further speculation around a rate rise emerging following some hawkish comments from senior Bank official Gertjan Vlieghe. We will have to wait to see whether the November meeting will be the trigger for a rate rise, but it would appear that we will not have to wait too long before we see some tightening in monetary policy.