MPC showing a creeping optimism over latest data

17th December 2014 By: Ranko Berich

Bank of England Monetary Policy Committee minutes – 17/12/14

While the latest Monetary Policy Committee minutes show the Bank of England is still in ‘wait and see’ mode, a closer reading suggests a creeping optimism in its assessment of the UK economy.

Inflation is limp due to falling commodity prices, not least the crash in oil, but output growth is surprisingly positive. Wage growth in the UK is finally beginning to show, alongside the increase in productivity that the economy has desperately needed.

Despite the optimism, the latest spate of positive data was not good enough to justify the MPC tightening policy. Just two members remained bullish on wages and inflation, willing to argue the case for hiking now.

If commodity prices start to stabilise and the current wage growth accelerates, a tipping point is inevitable and other MPC members will be quick to add their voice to the calls for higher rates.