- Martin Weale and Ian McCafferty, MPC members
Monetary Policy Committee's unanimity breaks up, as two Bank of England officials unexpectedly voted to start increasing interest rates in August, marking the first split on rate at MPC since July 2011. Martin Weale and Ian McCafferty were in favour of raising interest rates to 0.75% from 0.5%, whereas the rest of policy makers voted to keep the base rate at a historic low of 0.5%. Nevertheless, the MPC members were unanimous on the asset purchase facility, which currently stands at 375 billion pounds. The hawks suggested that a continuing rapid decline in jobless rate alongside evidence of the labour market tightening indicate that wage growth would pick up. Weak wage growth and its subdued influence on inflation, which currently appears to be a significant weapon at doves' disposal, may be temporary or may last for much longer than policymakers forecast. If wages increase in the coming months, then the case for an earlier rate hike may gain more ground. If wage growth remains weak for longer than expected, then the case for keeping the bank rate at ultra low even further beyond early next year could undermine BoE's credibility.
Although Britain's economy is still slightly smaller than before the financial crisis, the BoE forecasts it will grow by 3.5% this year, which would be its fastest rate in a decade.
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