It also expects the inflation-damping effects of a strengthening sterling to be mitigated by rising domestic costs, but added that the data on wage growth had “surprised significantly to the upside over the past quarter, though this reflected the more volatile bonus payment component”.
However, it said, some members did see upside risks to the inflation forecast, among them, the likelihood of stronger consumer demand buoyed by improving credit conditions and growing consumer confidence. As well as the possibility of less spare capacity within the market than has been assumed.
For one member, Ian McCafferty, however, these risks were, on balance sufficient to justify hiking now.
“They increased the risk of a more significant overshoot of inflation following its return to the target,” it said, adding that McCafferty believed no greater clarity was likely to be achieved by waiting to see how the data evolved over the next few months.
For this member, it was unlikely that much greater clarity could be achieved by waiting to see how the data evolved over the next few months, while postponing the start of the process of gradually raising Bank Rate increased the risk of having to increase it more sharply later on.
