Andrew Haldane joined Michael Saunders and Ian McCafferty in voting to raises to 0.75%, while the six-strong majority sided with holding rates at the current 0.5% rate and leaving quantitative easing unchanged at £445bn.
Haldane’s changed vote is noteworthy, says Brown Shipley deputy CIO Alex Brandreth.
“This is important because it’s the first time the chief economist has dissented in seven years, which wasn’t anticipated by markets.”
Next move
Brandreth pins the next move on November, stating there will be more clarity about Brexit at that time.
However, Ben Brettell, senior economist at Hargreaves Lansdown, said rates may not rise for the rest of the year. “Policymakers will at the very least want confirmation that the weak first-quarter growth figure was just a blip before raising borrowing costs.”
Russ Mould, investment director at AJ Bell, said the BoE is closer to the European Central Bank rather than the more aggressive US Federal Reserve in its outlook, stating any tightening of monetary policy will likely come slowly and in modest steps.
Mould added: “Today’s inactivity may reflect lingering doubts over the underlying strength of the UK economy, which appears to be mired in another soft patch.
“This heaps more pain on savers as inflation continues to comfortably outstrip the meagre interest earned on their cash and real wage growth remains negligible.”
Sterling
Following the bank’s decision, Sterling jumped by almost a cent against the dollar.
Brettell added: “As recently as April it looked a racing certainty that rates would have risen by now. But a slew of disappointing economic data in the subsequent weeks has firmly put paid to that.
“Today’s decision was always expected to be one of no change, with even those who think a rate rise is coming focusing on the Bank’s August policy meeting as the most likely candidate for an upward move.”
