Bank of England Monetary Police Committee (MPC) members unanimously against interest rates and increases to asset purchases this month.
No MPC member thought that policy tightening was needed at present, but warned that continued rapid house price increases would be a concern.
The 4% increase in the sterling price of oil would be likely to raise the near-term profile for inflation; while the appreciation of sterling, if sustained, would bear down on inflation further out, including in the 18-24 months ahead range pertinent for the forward guidance knockout.
At the last meeting voting against further quantitative easing was unanimous. Hawk Martin Weale voted for hikes at the least meeting, but changed back at this.
Vicky Redwood, chief UK economist, Capital Economics:
The minutes of this month’s UK MPC meeting suggest that the Committee is happy with its policy stance, despite the arguably disappointing impact of forward guidance. No-one thought that any of the “knockouts” that would invalidate the recent forward guidance had been breached.
We have had a fair bit of news since the meeting, but it probably broadly balances out. While the unemployment rate nudged down in July, the inflation outlook has improved (with CPI inflation dropping in August, the oil price easing and the pound rising further). The minutes stress that, if the recovery falters, the case for more QE will be stronger.
But for now, it looks like the Committee is not too concerned about the lack of any downward impact on market interest rates from its forward guidance and that its only action will be “to emphasise in public communication that the 7% threshold was not a trigger” for a rate rise. Overall, then, more QE before the end of the year now looks less likely, although we still think that markets are wrong to expect interest rates to be rising by the start of 2015.