Bank holds as pressure to hike rates builds up
THE BANK of England’s monetary policy committee (MPC) yesterday voted to keep interest rates on hold, but many analysts believe the UK is creeping towards a hike.
The MPC members voted to keep policy on hold once again, but many economists now expected the Bank to announce the UK’s first post-crisis rate hike before the end of the year. Groups predicting a 2014 increase include Barclays, Oxford Economics, BNP Paribas, Berenberg, Investec and a range of others.
But some business groups remain unconvinced of the case for tighter policy.
“The current calls for higher rates, particularly while wage pressures are still weak, are unjustified,” said David Kern, chief economist at the British Chambers of Commerce.
“Official figures show that a large number of people are working part time because they are unable to find a full time job – refuting the view that there is no spare capacity in the economy,” he added.
Weak pay growth figures have been one of the last factors holding the Bank’s policymakers from increasing interest rates. The latest official data suggest earnings are shrinking in real terms.
There has yet to be any dissent to the MPC’s unanimous decisions during governor Mark Carney’s first year, and markets are watching closely for the first member to break ranks.