BoE minutes reveal that CPI could rise to three per cent in summer

The Bank of England has released the minutes for its last Monetary Policy Committee meeting - Sir Mervyn King's last - and they show that members think that inflation, as measured by the Consumer Price Index, could rise to three per cent by the summer (release).

Members voted unanimously to hold interest rates, while three of the nine voted to increase asset purchases (the same split we've seen at most recent meetings). The minority said that the case for more stimulus remains compelling.

It's interesting to note the discussion of wages, Average Weekly Earnings were said to have "remained unusually weak" with annual private sector regular pay growth of just 0.8 per cent in the first quarter.

Indicators of activity around the world had been mildly positive, but it remained hard to judge whether the recovery in growth would be sustained.

Howard Archer of IHS Global Insight on what we could expect from Sir Mervyn's successor, Mark Carney:

We now move to the Carney era at the Bank of England, and he will no doubt be relieved to see the economy looking a bit perkier as he takes up the reins.Indeed, with the economy currently showing signs of widespread improvement, pressure on Carney to take immediate action has receded thereby giving him more time to take full stock of the situation from within the Bank of England and to establish his working relationship with the rest of the MPC.

We believe it is unlikely that any major policy action will occur at the July MPC meeting, especially as the committee will be getting the Bank of England’s new growth and inflation forecasts at the August meeting.