No change but BOE leaves rates door ajar

The Bank of England has kept interest rates on hold at 0.5 per cent – but left the door open for a rise in May as it revealed yesterday that two policymakers on its monetary policy committee (MPC) have voted for an immediate rise.

Minutes of the March MPC meeting showed the vote was 7-2 in favour of keeping rates on hold following the quarter-point hike in November, the first rise in ten years.

But the minutes confirmed the Bank’s view that “ongoing tightening of monetary policy” will be needed to bring inflation back to its mediumterm 2 per cent target.

The two dissenters on the MPC – Ian Mccafferty and Michael Saunders – were concerned that an increase in wage growth to 2.8 per cent in the year to January would lead to stubbornly high inflation.

The Bank said the two policymakers believed a “modest tightening of monetary policy at this meeting could mitigate the risks from a more sustained period of above-target inflation that might ultimately necessitate a more abrupt change in policy and hence a greater adjustment in growth and employment”.

Bank governor Mark Carney has already warned that rates will need to rise “somewhat earlier and by a somewhat greater degree” to get inflation back to target.

The Bank also said that it expects the economy to take a temporary hit from the recent “Beast from the East” snow disruption, with early estimates among its staff suggesting growth may slow to 0.3 per cent in the first quarter from 0.4 per cent in the final quarter of 2017. 0 Mark Carney has already warned of a rates rise