The Bank of England’s monetary policy committee voted 7-2 on whether to leave interest rates unchanged this month, according to the minutes of the meeting. They show that Martin Weale and Ian McCafferty voted, again, to raise borrowing costs to 0.75%. They state that wage growth could pick up sharply in the months ahead, as the labour market tightens. However the remaining members voted to leave them at their current record low of 0.5%.
They also said current economic circumstances continued to justify an immediate rise in Bank Rate. While CPI inflation was well below the target, this was largely the effect of the higher exchange rate and lower raw material prices.
The BoE minutes also show that there was “a material spread of views on the balance of risks to the outlook” among the seven members of the MPC who voted to keep rates at 0.5%. Some MPC members sound rather dovish, concerned that UK growth will fall faster than expected.
The pound rose almost half a cent against the US dollar since the Bank minutes came out, to $1.567. This suggests that some traders had expected an 8-1 or 9-0 vote on interest rates, with Weale or McCafferty, or both, dropping their call for rate rises
New figures from the Office for National Statistics today showed UK real wages have fallen for the sixth year. This showing the full scale of the squeeze on living standards, as earnings have stagnated in the face of economic ‘recovery’. Real pay, adjusted for inflation, fell by 1.6% this year, with gross weekly earnings barely growing at all.
After Tuesday’s report showing house builders were increasingly confident about the outlook, data surprised today showing housing starts fell unexpectedly in October. They dropped 2.8% to a annual rate of 1.009m houses compared to expectations of a 1.025m rate.
The minutes were also released yesterday from the Federal Reserve. The main talking point was the discussion on inflation concerns. The committee observed that they need to stay attentive to evidence of a downward shift in longer-term inflation expectations. The effect of lower inflation would also become more worrisome if growth falters at the same time.
09:00 - EUR – Markit Manufactuiring PMI expected to rise to 50.8
09:00 - EUR – Markit PMI Composite expected to rise to 52.3
09:00 – EUR - Markit Services PMI expected to rise to 52.4
09:30 – GBP - Retail Sales expected to rise to 3.8%
13:30 – USD - Consumer Price Index expected to fall to 1.6%
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