Hawks, doves and owls

The seven men and two women who set our rates

THE phoney war at the Bank of England is finally over and the first shots have been fired in the battle over interest rates. One member of the Monetary Policy Committee (MPC) that sets rates voted for an immediate increase in borrowing costs yesterday following months of umming and ahhing.

This so-called ‘hawk’ was outvoted by the other eight more ‘dovish’ members of the panel, meaning rates remain frozen at 0.5pc for now.

But it was the first split on the MPC this year and a sign that the mood is beginning to change – albeit slowly for now.

Governor Mark Carney, one of those to vote against an instant rate rise, said: ‘The likely timing of the first Bank rate increase is drawing closer. However, the exact timing of the first move cannot be predicted in advance.’

Rates last rose in July 2007, from 5.5pc to 5.75pc, before being slashed to record lows in the Great Recession.

They will not rise again until a majority on the MPC vote for them to do so, which will push up the cost of mortgages for millions of borrowers.

But higher rates will also boost returns for Britain’s army of savers who have lost out since rates hit 0.5pc in March 2009.

Here, we look at the MPC members who have borrowing costs and savings rates in their hands and how they voted – starting with the leading hawk.

IAN MCCAFFERTY

voted for rates to rise to 0.75pc The former chief economic adviser to the CBI argued for higher rates last year before the dramatic fall in inflation to zero forced him to change his mind.

However, McCafferty broke ranks yesterday, arguing f or higher rates now, amid fears inflation will rise back above the 2pc target in the coming years.

He cited rising wages and strong demand and looks set to lead the argument for higher interest rates in the coming months.

Nina Skero, an economist at the Centre for Economics and Business Research, said: ‘Eight members voted to keep rates at 0.5pc but one hawk finally decided to stick its claws out and vote for an immediate rise.’

MARTIN WEALE

voted for rates to stay at 0.5pc This was unexpected. Weale has long been seen as one of the most hawkish members of the MPC and along with McCafferty was voting for rates to rise in the second half of last year before the fall in inflation.

He recently argued that rather than ‘fizzling out’, the jobs market is ‘fizzing away nicely’.

And, with wages on the rise once again, it is unlikely to be long before he votes in favour of rates going up, possibly as soon as next month.

DAVID MILES 0.5pc

Miles was for a long time seen as one of t he more dovish members of the committee but his position has changed in recent weeks. ‘The case for a gradual normalisation [in i nterest rates] is stronger than at any time I joined the committee over six years ago,’ he said last month.

It therefore came as something as a surprise that he did not vote for rates to rise yesterday in what was his last meeting as a member of the MPC.

All eyes will now be on his replacement, Gertjan Vlieghe, next month.

KRISTIN FORBES

0.5pc

The American acad e mi c recently warned that ‘the next move in interest rates will be up and it’s coming at some point in the not-too-distant future’.

But with inflation at zero and the oil price on the slide once again, she too held fire yesterday.

Forbes may, however, be joining the hawks in the coming months.

MARK CARNEY

0.5pc

The Governor voted for rates to stay at 0.5pc yesterday but he was as clear as he could possibly be that rates will not stay there forever.

The Canadian, who has been called the rock star of central banking, appeared to position himself as something of a hawk in waiting.

He insisted that yesterday he was presenting ‘ t he MPC’s best collective judgement’ which appeared to suggest rates would not rise until next spring or even summer.

But Carney stood by the comments he made in Lincoln last month – which are his own personal views – when he said ‘the decision as to when to start raising interest rates will likely come into sharper relief around the turn of this year’.

BEN BROADBENT

0.5pc

As deputy governor for monetary policy Broadbent has kept his cards close to his chest in recent months and voted for no change yesterday.

But along with Carney he will be a crucial figure in the coming months. The two of them – both formerly of Goldman Sachs – could see their votes tip the balance on the committee.

NEMAT SHAFIK

0.5pc

Shafik, who is known as ‘Minouche’, is still s omething of an unknown quantity a year after arriving on Threadneedle Street following a stint at the International Monetary Fund.

As deputy governor for markets and banking, she has concent r ated on cl eaning up t he industry following a series of scandals in the wake of the financial crisis.

When asked i f she would describe herself as a hawk or a dove she likened herself to an ‘owl’ who would be ‘ wise’ when setting interest rates.

SIR JON CUNLIFFE

0.5pc

Another who has remained neutral on the MPC since he took over as deputy governor for financial stability in November 2013, former civil servant Cunliffe again voted for no change in interest rates yesterday.

ANDY HALDANE

0.5pc

The central bank’s chief economist is seen as the leading dove on the committee and has in recent months said that he is as likely to vote for a rate cut as a rate rise.

That puts him firmly at odds with others on Threadneedle Street, including Carney.

His big worry is that an early rate rise could make a still-tricky economic situation worse and even bring a prolonged period of deflation or falling prices.