Bank rate split remains at 6-3
The Bank of England was no closer to voting for a rise in interest rates in May and two of the policymakers backing a rise conceded the argument was still “finely balanced,” minutes showed.
The Monetary Policy Council voted 6-3 against a rise for a fourth straight month, with Andrew Sentance, Martin Weale and Spencer Dale all saying the case for tightening was strong and had been reinforced by this month’s quarterly update to the Bank’s economic forecasts.
But both Weale and Dale said the argument was finely balanced due to a still sluggish economy and arch hawk Sentance’s replacement when he leaves the council this month, Ben Broadbent, struck a distinctly less hawkish tone at a first public appearance on Tuesday.
Economists had seen a small chance that sluggish first-quarter GDP data could have persuaded either Weale or Bank chief economist Dale to stop calling for a rate rise.
But both persisted with their vote for a 25 basis point increase. Arch-hawk Andrew Sentance, at his final MPC meeting, continued to vote for a 50 basis point rise.
“The most interesting thing is the line from Dale and Weale that it was a finely balanced decision,” said Ross Walker at Royal Bank of Scotland.
Debt markets do not price in a rise in the Bank’s main interest rate – now at 0.5 per cent — until the end of this year although half of the economists polled by Reuters last week still saw rates rising sometime in the third quarter.
“Given the slightly dovish tone of April’s minutes, and the anaemic economic growth recorded in quarter one, it is no surprise that no additional members voted to increase rates.
“By the same token, the upward revision to the Bank’s near-term inflation forecast would have prevented any of the hawks on the MPC from changing their vote. In the highly uncertain environment, it seems the best that MPC members can do is remain in wait-and-see mode.”