Bank of England rate-setters sending out mixed signals

BANK OF England rate-setters have sent mixed signals over whether to hike interest rates next month, pointing to the prospect of a split vote.

Michael Saunders, a member of the Bank’s nine-member Monetary Policy Committee, brushed aside recent weak economic data, saying that the significance of the slowdown is “questionable”.

He added: “Economic activity in March, and especially retail sales, was hit by unusually heavy snow. Previous experience suggests that such snow effects typically reverse in the next month or two.”

This, Mr Saunders added, means that the Bank’s “foot no longer needs to be so firmly on the accelerator”. “Any further tightening is likely to be at a gradual pace and to a limited extent. A key point is that ‘gradual’ need not mean ‘glacial’,” he said.

Mr Saunders was one of two members of the MPC to vote for a hike in rates in March, from 0.5 per cent to 0.75 per cent, in order to curb growing inflation triggered by the collapse in the Brexithit pound. But inflation fell back to 2.5 per cent from 2.7 per cent in March, a one-year low, easing pressure on the Bank to act.

Mr Saunders’ comments come in stark contrast to Bank governor Mark Carney, who cautioned markets on Thursday that a rate rise in May is not a certainty. Currency traders, who had sent the pound soaring in the belief that a May hike was a certainty, were caught on the back foot.