Instant view - Two Bank members voted for rate hike
LONDON (Reuters) - Bank of England policymaker Martin Weale unexpectedly joined Andrew Sentance in voting for a quarter-point rate rise this month, minutes to the Bank's January Monetary Policy Committee meeting showed on Wednesday.
Following are analysts' comments:
VICKY REDWOOD, CAPITAL ECONOMICS
"January's MPC minutes suggest that the Committee was edging closer towards a near-term rate hike -- but of course yesterday's weak GDP figures have altered the picture somewhat. Unsurprisingly, most members judged that the risks to inflation in the medium-term had probably shifted upwards. But the Committee also went as far as running through the pros and cons of raising rates and Martin Weale joined Andrew Sentance in actually voting for a 25bps rate hike.
"Even some of those who voted to leave rates on hold saw the decision as "finely balanced" and wanted to wait to assess recent developments in February's Inflation Report. On their own, then, the minutes suggest that a February rate hike is a bigger danger than before. However, yesterday's GDP figures could well dissuade the waverers from rushing into a premature policy tightening."
BRIAN HILLIARD, SOCIETE GENERALE
"The cracks are starting to appear in the MPC consensus. Obviously, this meeting was held before the GDP numbers but for me ... there was this key passage which said that for most members recent developments implied that the risk of inflation in the medium term had probably shifted upwards.
"For some of these members the decision this month was finely balanced. So not only did Weale vote for a rate increase, there's a hint that other members were teetering on the brink of doing that as well.
"The GDP numbers will dampen some of the ardour of the horse temporarily but I am sceptical of the ONS's calculation that only half of the fall in GDP was due to the snow and I think we will see a strong bounce-back, so it still sits comfortably with my view that the Bank will go (for a rate hike) in the second half of the year when all these effects have washed out."
HETAL MEHTA, DAIWA
"A change in the voting pattern was unexpected. It was expected that members would have waited for the February Inflation Report. Now we have seen the awful GDP figures, which the MPC would not have seen at the time of their meeting, Martin Weale must be wishing he'd waited.
"Until yesterday it seemed that more MPC members would gradually vote for higher interest rates, but now any premature rate rise to combat inflation is out of the question.
"We think the earliest the Bank will now feel comfortable about considering rate hikes is Q4 this year."
ALAN CLARKE, BNP PARIBAS
"There was always a risk of a move in a hawkish direction but it's a surprise that it's Weale that has joined Sentance. Most people assumed he would be on the dovish side.
"The minutes do show increasing discomfort with inflation which to me suggests a rate hike by mid-year. But you have to remember that the meeting came before the Q4 GDP data."
PHILIP SHAW, INVESTEC
"The minutes effectively show some momentum on the committee towards a tightening. Members will not have known the Q4 GDP figure when they met which means January's discussions may have been overtaken by events."
"It is clear from (Governor Mervyn) King's speech last night that he does not favour higher rates. There is uncertainty over rate prospects but we tend to stick to our view that they will be on hold for some time longer."
"Our view is that they will move in Q4 this year but there is clearly a risk of a tightening before then."
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