(MENAFN– ecpulse) Bank of England minutes for July 9-10 policy meeting showed that policymakers voted unanimously to hold both interest rate and amount of asset purchases as recovery strengthens.
However, some members argued that the risks an interest rate hike could have on recovery are receding.
Data due this week will probably show that Britain posted its eight consecutive quarterly growth, coming back to pre-crisis levels.
Sustained economic momentum looked ‘more assured,’ BOE minutes mentioned. First-half growth may be at or above long-term average, where volatility may occur from the shaky economy situation in other advanced nations.
The BOE illustrated that the recent pound’s appreciation reflect the strong performance of the British economy.
MPC members are still divided over the amount of slack in the economy, the key measure Mark Carney shifted to after the drop in unemployment rate.
“On one interpretations, the risk of a small rise in bank rate derailing the expansion and leaving inflation below the target in the medium term was receding as that expansion became more established,” minutes said.
On the other side, other members see that “although the domestic economy was growing at or above longer-term average rates, there was little indication of inflationary pressures building,” the minutes said. “A premature tightening in monetary policy might leave the economy vulnerable to shocks.”
The BOE will wait for next month’s quarterly inflation report, as it will include the latest growth and inflation projections as well as expectations of spare capacity.
Some analysts predict to see a split among policymakers regarding the timing of which first interest rate increase in seven years should take place.
The nine-panel members “would have the opportunity to consider in more depth the signal to take from the various indicators on the labor market,” said BOE minutes.
There is no preset time for first increase in bank rate, where “when Bank Rate did begin to rise, it was expected to do so only gradually.”
“Bank Rate was expected to remain below average historical levels for some time to come. It remained the case, however, that the actual path for monetary policy, even after the first increase in Bank Rate, would remain dependent on economic conditions,” minutes said.
The minutes revealed that inflation outlook “would depend in large measure on how quickly spare capacity was absorbed, and the impact this would have on wages and firms’ pricing power.”
As of 09:05 GMT, the pound retreated for a sixth straight session versus the dollar to trade around 1.7047 after marking a high of 1.7093.
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