"With global trade concerns, continued Brexit uncertainty and subdued domestic activity, today’s MPC decision to hold rates is unsurprising."
Andy Haldane joined Michael Saunders and the hawkish outgoing-MPC member Ian McCafferty in calling for an immediate rate rise.
In the minutes from the MPC's latest meeting, members agreed that the dip in output growth in the first quarter was temporary, with momentum recovering in the second quarter.
The Committee also noted that employment growth remained solid and business activity has been stable, pointing to Q2 growth in line with the Committee’s May projections.
CPI inflation was 2.4% in May, unchanged from April, but is expected to pick up by slightly more than projected in May in the near term, reflecting higher dollar oil prices and a weaker sterling exchange rate.
The Committee said its "best collective judgement remains that, were the economy to develop broadly in line with the May Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target".
However for the majority of members, an increase in Bank Rate was not required at this meeting. All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.
Vikki Jefferies, proposition director at PRIMIS and PTFS, commented: “Speculation around a Base Rate increase has dominated financial pages since the start of the year. The majority of commentators agree – a rate rise is not an if, but a when. While uncertainty remains around timescales, brokers need to start seeing this as an opportunity to reengage with their back-books.
“Demand for remortgages is already strong – as the latest UK Finance figures showed – and now is the prime time for brokers to further drive these conversations with the numerous borrowers who are approaching the end of their fixed rate, or who have already reverted to their lender’s SVR.”
Nick Dixon, investment director at Aegon, added: “With global trade concerns, continued Brexit uncertainty and subdued domestic activity, today’s MPC decision to hold rates is unsurprising.
“Looking further out, two factors will be critical for inflation and hence interest rates. First the quality of Brexit especially the eventual trade deal will impact the level of sterling and hence inflation. Second is the labour market and whether wage pressures become embedded and create ‘cost push’ inflation. If sterling continues to depreciate and wage increases lead to higher prices, there will be pressure for interest rates to rise higher and faster than markets currently expect."
