GB: BoE MPC Minutes

Wed Apr 22 03:30:00 CDT 2015

Minutes of the BoE's April MPC meeting confirmed another expected unanimous 9-0 vote to leave Bank Rate at 0.5 percent and QE at Stg375 billion.

Two members - almost certainly the hawks, McCafferty and Weale again saw the call as finely balanced but as far as the rest were concerned it looks as if the decision was a essentially done deal.

Indeed, one point of note was the commentary on wage growth. Previously, a pick-up in earnings would have been interpreted as a sign that a tightening labour market was at last prompting a rise in underlying inflation pressures. However, now the (majority of the) MPC would appear to regard stronger wage growth as a prerequisite for the CPI to reach its 2 percent medium-term target.

In other words accelerating average earnings would not be seen as a threat to consumer prices but rather a necessary development for the MPC to achieve its inflation goals. In turn, this suggests that the likelihood of an increase in Bank Rate in 2015 has diminished a little further.

The Bank also acknowledged the disinflationary effects of the strong pound which they thought may be depressing prices rather more quickly than previously anticipated. This would prove transitory should the exchange fall in response to, for example, a hung parliament next month but for now is another reason for supposing that monetary tightening is not on the MPC's agenda.

The MPC did not dwell on the amount of slack left in the labour market. This was left until the May deliberations when the new Quarterly Inflation Report (QIR) will be available. This is expected to provide a thorough, and potentially crucial, investigation into how the supply-side of the economy is evolving.

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.