“I certainly don’t believe we are out of ammunition,” rate-setter Ian McCafferty told the Wall Street Journal today.
McCafferty voted to keep interest rates at 0.5 per cent this month, backtracking after voting for a hike since the summer. He said the decision to do so was due to slower pay growth. Average weekly earnings grew by two per cent in the three months to November compared with the same period in 2014. It marked a nine-month low in pay growth.
“I think an immediate rate rise isn't as necessary as I had felt last autumn,” he said. McCafferty also said he and the rest of the monetary policy committee believed the next move in interest rates would be up.
“The upside risks to wage costs and inflation haven't disappeared by any sense, but they have been pushed further out."
He also said that uncertainty from a possible referendum on EU membership this year was not appearing to have an impact on businesses.
“In terms of what I hear from businesses, it has only as yet had a limited effect on business confidence and in particular their investment intentions,” he said.
“So far, businesses are still operating on the basis that investment intentions remain firm.”