At least one of the BoE Monetary Policy Committee’s nine members will vote next month to raise the key rate from a record low, creating the first split vote of the year, according to 65% of 26 economists in a Bloomberg survey

Bloomberg
London


The Bank of England is close to taking a concrete step towards its first interest-rate increase in eight years.
At least one of the Monetary Policy Committee’s nine members will vote next month to raise the key rate from a record low, creating the first split vote of the year, according to 65% of 26 economists in a Bloomberg survey. That’s up from 18% in June.
Momentum towards an increase accelerated after Governor Mark Carney said the timing for raising rates would be clear by the end of the year. Strengthening wage data may have already pushed one MPC member to dissent, though that won’t be revealed until tomorrow’s publication of minutes of the July policy meeting. The majority see August, when the bank publishes new forecasts, as the more likely time for a split.
“It’s not impossible there’ll be a split in July, but in the context of their new forecast, August would be the obvious time to do it,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. “We are inching closer and they’re clearly keeping open the door of a November rate rise, but my central expectation is that they’ll move in February.”
Carney’s comments last week spurred some investors to bring in bets on the timing of a move from the record-low 0.5% to May, according to forward contracts based on the sterling overnight index average, or Sonia. That compares with bets the week of July 6 that policy makers would move in August 2016.
Still, a Bloomberg survey of 29 economists showed Carney’s remarks didn’t have such a pronounced impact. Just five said his words prompted a reconsideration of their call for the first interest-rate increase.
A split on August 6 would coincide with a change of BoE communication, with investors getting instant access to the MPC voting record, rather than having to wait two weeks. The central bank will also immediately publish its new quarterly projections, changing a format that’s been in place for years.
While some analysts have said the BoE won’t begin its exit from emergency settings until the US Federal Reserve has started its own rate increases, one MPC member, David Miles, has thrown cold water on that idea, calling it “daft.”
The Fed is forecast to raise its key rate in September, according to a separate Bloomberg survey.
Policy makers Martin Weale and Ian McCafferty, who abandoned a push for higher rates in January as inflation slowed, have cited the potential for a build-up of inflationary pressure in the labour market. Wages rose an annual 3.2% in the three months through May, the fastest in more than five years. “The latest average earnings data must be of concern to some MPC members,” said Alan McQuaid, an economist at Merrion Capital in Dublin.