LONDON (Reuters) - The Bank of England’s interest-rate setters are expected to announce on Thursday that they are raising interest rates for the first time in a decade.
The BoE surprised markets on Sept. 14 when it said, despite the big uncertainties about Brexit, that most of its policymakers thought a rate hike was likely in the coming months.
The signal came even as the nine-strong Monetary Policy Committee members voted 7-2 to keep rates at their all-time low of 0.25 percent.
That means at least three of its members will have to switch their vote if the BoE is to raise rates on Nov. 2.
Investors will be looking for the size of the majority in favour of the expected rate hike as a way to gauge the likelihood of another rate hike at some point in 2018.
Following is a brief description of each of the MPC's members and their latest comments on the outlook for rates.
Since arriving at the BoE more than four years ago, Carney has signalled on previous occasions that a rate hike might be coming, only to be wrong-footed by the economy’s twists and turns. This time, he has sounded more emphatic. Carney was one of the MPC members who in September thought a hike was likely to be needed in the coming months. “Now, we will take that decision based on the data. I guess that possibility has definitely increased,” he said on Sept. 29. “What we have said (is) that if the economy continues on the track that it’s been on - and all indications are that it is - (then) in the relatively near term we can expect that interest rates would increase somewhat.”
Carney’s number two for interest rates and other measures to help the economy, Broadbent has not spoken publicly since September’s surprise announcement. But in August he said a hike would not be a big risk. “I think there may be some possibility for interest rates to go up a little bit,” he said “One shouldn’t overdo this. If and when it happens there will be a lot of talk about the first rate rise since ‘x’. But it’s just a rate rise and we got perfectly used to rate rises of this size in the past.”
Haldane was long considered one of the strongest supporters of continued record low rates. But he shook up markets in June when he said he was likely to vote for a rate hike in the second half of 2017 and he was among the MPC members who said in September that a rate hike was likely to be needed in the coming months. “Let’s be clear here: for me (a rate hike) would be a good news story. This would be interest rates getting back to normal, even if the new normal is different to the old normal.” he said on Sept. 27.
Cunliffe suggested last month that he was in no hurry to vote for a rate hike. “I am not going to try and anticipate the meeting, but for me the economy has clearly slowed this year,” Cunliffe said in a newspaper interview published on Oct. 23. “Over the forecast period of three years rates will need to rise. The exact timing of when that starts? Well, that for me is a more open question.”
Ramsden, who joined the BoE in September from the British Treasury where he worked as the top economic adviser, surprised investors last month when he distanced himself from the MPC’s majority view that rates probably need to rise soon. “Despite continued robust growth in employment, there is no sign of second-round effects onto wages from higher recent inflation,” he said. Ramsden is no stranger to the MPC debates having attended 92 of its meetings in his previous role at the Treasury.
Vlieghe pushed up the pound by almost as much as the surprise Sept. 14 BoE announcement when, a day later, he suggested that he too was close to voting for a rate hike. Until then, the former hedge fund economist had argued against such a move and was seen as the BoE’s strongest supporter of record-low rates. “If these data trends of reducing slack, rising pay pressure, strengthening household spending and robust global growth continue, the appropriate time for a rise in Bank Rate might be as early as in the coming months,” he said on Sept. 15.
Tenreyro is another newcomer to the MPC which she joined in July. She has voted twice to keep rates on hold and she said last month that her support for the MPC’s majority position was “very contingent on the data”. Tenreyro, a professor at the London School of Economics, also said raising rates too soon would be a costly mistake.
Saunders, a former economist with financial services firm Citi, has been in the minority of MPC members voting for a rate hike since June. “We do not need to be putting the brakes on so much that the economy weakens sharply. But our foot no longer needs to be quite so firmly on the accelerator,” he said on Aug. 31.
McCafferty has called for a rate hike on and off over the past three years and is currently the other MPC member, alongside Saunders, who has voted for a hike to 0.50 percent. “I feel on the balance of monetary policy that there is a need for change. I think this would be justified and would be the prudent thing to do at this stage,” he said on July 4.
On Oct. 5 he welcomed the fact that markets were pricing in a November rate rise.
Writing by William Schomberg Editing by Jeremy Gaunt.