Just one member of the Monetary Policy Committee voted to increase the base rate at last week’s meeting.
The minutes from the meeting show Ian McCafferty voted to increase the base rate by 25 basis points to 0.75 per cent.
McCafferty believed the risks of overshooting the Bank’s medium-term inflation target of 2 per cent were “sufficiently to the upside to justify an immediate increase in Bank rate”.
The minutes say: “For [McCafferty], it was unlikely 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.”
Capital Economics senior UK economist Samuel Tombs says: “It would not be surprising if one or two more MPC members joined Ian McCafferty in the coming months. The minutes emphasised that ‘some members’ saw upside risks to the inflation forecast.
“But we doubt that rates will rise until the governor changes his view – note that interest rates have never risen without the governor voting to hike.
“And in his speech last month, Mark Carney stated that he wanted to see core inflation and growth in unit wage costs pick up before voting to raise rates.
“The recent strengthening of the pound and rebound in productivity suggest that those pick-ups are unlikely to be seen in the data for some time. So while the governor’s previous capriciousness means that a 2015 hike cannot be entirely ruled out, [the minutes] support our view that a majority will vote to keep interest rates on hold until the second quarter of next year.”
For the first time last week, the Bank simultaneously released its base rate decision, the minutes of the decision process and its inflation report, on what has been dubbed ‘Super Thursday’.