While the MPC members have so far been singing from the same hymn sheet – all nine voted to hold rates at 0.5% in July – for David Page, senior economist at AXA Investment Managers, August could usher in this year’s first split vote.
“Faster domestic wage growth has concerned a number of members that inflation risks are skewed to the upside and only international concerns, primarily Greece, put these members off voting for a hike this month,” he says.
“Most, however, weighed the rise in pay against an acceleration in productivity growth and external pressures, particularly the sterling, bearing down on the inflation outlook.”
Page expects this “finely balanced” debate to drag into the first quarter of 2016, with the first rate hike coming in February.
At face value
Policy makers in the UK and beyond appear to have addressed past mistakes by adopting a much more transparent stance when it comes to forward guidance, but that doesn’t mean investors should take everything they say at face value.
Ian Kernohan, senior economist at Royal London Asset Management, for example goes against the consensus in believing that the Bank of England will act to raise rates before the end of this year.
“Assuming a reduction in uncertainty surrounding the position of Greece in the eurozone, and subject to domestic economic data, it looks as if a small group of MPC members will soon be voting for a hike in rates,” he asserts.
