MPC members to differ on first rate increase

Note: This section contains information in English only.
Source: Dukascopy Bank SA
"For all that we agree on, I think differences are likely to emerge when it comes to the timing of the first rise. There are disagreements over the degree of slack, and the impact this has on inflation. That will naturally lead to differences in view on the right level of bank rate down the road"
- David Miles, Monetary Policy Committee member

During the last policy meeting, the Bank of England's Monetary Policy Committee's members were unanimous in voting in favour of keeping both interest rates and the stimulus programme unchanged. Policymakers are anticipating the jobless rate will move closer to the 7% threshold soon, hence, there is no need to pull the trigger yet. Moreover, MPC members pledged to keep the monetary policy unchanged even after the previous target of 7% will be met. 

Domestic economy is on the path to recovery and policymakers feel comfortable with the current stance of the monetary policy. Moreover, they have been univocal in their assessment of the economy for quite a while. Nevertheless, according to the external MPC member David Miles, they are likely to have different opinion on deciding the timing of central bank's first rate hike. MPC members already disagree about the amount of slack within the economy and the impact it has on inflation. At the time being, the first rate increase is projected to be only gradual in order not to cause a chaos in the market. Earlier this month, another MPC member Martin Weale pointed out the economy is running out of spare capacity faster than most of the officials estimated a month earlier. According to his projections, there is just 0.9% of spare capacity.
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