The March MPC minutes confirmed an expected unanimous 9-0 vote to keep policy on hold although the two main hawks (McCafferty and Weale) again emphasised that the decision to leave Bank Rate at 0.5 percent was a close one.
There was little fresh information on the Bank's view of prospective economic developments. However, there were clear indications of a growing concern about the rising level of the pound and the risk of further competitiveness losses should UK monetary policy be tightened.
All members agreed that the next move in official interest rates was most likely up but with sterling more than 8 percent stronger versus the euro than at the start of the year policy has already been tightened. As a result, the risk of CPI inflation remaining below 2 percent for a prolonged period has increased.
Exchange rate worries combined with today's non-inflationary labour market report (see calendar entry) boost the likelihood of Bank Rate being held at 0.5 percent through year-end. A hike before 2016 is still quite possible should wage growth pick up appreciably but without this the pound would probably need to fall significantly first.
The Monetary Policy Committee issues minutes of its meetings with a two week lag.
Investors who want a more detailed description of Bank of England opinions will generally read the minutes closely. The MPC may issue a statement after its monthly meeting but the minutes will be much more detailed. In particular they will reveal who voted for and against the Committee's decisions and provide a more detailed description of the MPC's thinking. As such, the minutes are a market mover as analysts parse each word looking for clues to future policy.
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