BoE minutes show hints of clarity for once
10th September 2015 By: Ranko Berich
BoE Meeting Minutes – 10/09/15
The Bank of England once again grappled with the UK’s inflation paradox this week, but for once there was some clarity to be found in the meeting minutes. The voting from the MPC shows it’s becoming increasingly convinced that the UK labour market is seeing enough productivity gains to justify the delay of a rate hike.
While only one reason amongst many, finding this elusive productivity growth is critical for the UK economy. It suggests the Bank of England can sustain the current low level of interest rates without creating an inflationary spike, and pushes back rate hike expectations.
The question for the markets now is just how long the MPC will maintain this near-consensus. Should unit labour costs and core inflation begin to show the same growth as wages, its instincts may turn hawkish in a hurry.