Super Thursday: Bank Split On Rate Increase

But Governor Mark Carney has signaled the bank is “moving closer” to a rate increase as economic growth remains among the fastest among advanced economies.

It expects inflation to be “muted” this year.

“We have given what we expect will have to be the broad shape of the path of interest rates over the next two to three years and we ” ve said for good underlying economic reasons it’s going to be shallower than usual.

Those expectations are for the BOE to begin lifting its benchmark short-term rate from 0.5%, where it has been pegged since early 2009, in the first half of 2016.

McCafferty, along with fellow hawk Martin Weale, voted for a rise in Bank Rate last autumn then later changed their minds due to low inflation.

Maike Currie, associate investment director at Fidelity Worldwide Investment, said: “The tide may be turning on the era of ultra-low interest rates, albeit it very slowly”.

In a dump of information today, known as Super Thursday, the Bank not only announced its rate decision for the month, but also published the minutes and the forecasts underlying its move. Traditionally the first Thursday of the month would have just seen the interest rate decision, with the Inflation Report the following Wednesday and the meeting minutes the Wednesday after that.

It is the 78th consecutive month that the central bank maintaining the ultra low interest rate unchanged.

He said: “The bank’s rhetoric had been increasingly hawkish of late (i.e. favouring higher interest rates)”. Despite higher revisions to growth, the central bank states they are anticipating the pace to slow into 2016 and fall to 2.6% from this year’s 2.8% pace.

However, both voted with the six other members of the MPC to keep rates at 0.5 per cent.

In its inflation forecast, the Bank of England predicted the Consumer Price Index measure of inflation would be at zero for July and August before edging up slightly in September.

‘This is understandable and is another welcome sign of the economy returning to normal.

He added: “The likely timing of the first bank rate increase is drawing closer”.

Mr Carney said in a recent speech that a decision on a rise would “come into sharper relief around the turn of this year”.

The bank said the impact of the strong pound on import prices will continue to push down on inflation for some time to come.

The weak inflation outlook means traders pushed back their time frame for the first British rate hike “into later 2015”, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange.