BOE MPC: Two Vote For Hike At March Meet; Focus On May>

-BOE MPC  Voted 7-2 for unchanged Bank Rate; 

-BOE MPC: McCafferty, Saunders Voted For 25 bps Rate Hike            

     LONDON (MNI) - The Bank of England Monetary Policy Committee (MPC) 

split over its decision to leave policy unchanged at its March meeting, 

with Ian McCafferty and Michael Saunders voting for a 25 basis point 

hike and the others awaiting the May Inflation Report forecast round. 

     The MPC said the data flow had come in broadly in line with the 

projections in the February forecast round and they were increasingly 

confident that pay growth and unit wage costs would pick up. The 

minutes will bolster the belief that the next hike will come in May.

     The MPC have repeatedly forecast an acceleration in earnings 

growth, only to be disappointed, but in early 2018 the signs are that 

pay growth is finally picking up.

     "The firming of shorter-term measures of wage growth in recent 

quarters and a range of survey indicators suggest pay growth will rise 

further in response to the tightening labour market. This provides 

increasing confidence that growth in wages and unit labour costs will 

pick-up to (inflation) target consistent rates," the minutes said.

     The minutes made no explicit reference to current market rate 

expectations, with a 25 basis point hike largely priced-in. With two 

members, however, coming out in favour of an immediate hike and the 

text referencing vanishing slack and rising pay pressures, the minutes 

leave the door wide open to that May hike.

     "The May forecast round would enable the committee to undertake a 

fuller assessment of the underlying momentum in the economy," the 

minutes said.

      With earnings growth expected to accelerate, the minutes reflected 

the view that domestically generated inflation would rise as the pass 

through from sterling weakness to prices fades.

      The minutes also noted that slack, which was likely very slender 

in the first place, was being further eroded.

      The majority of members took the view that with "few surprises in 

recent economic data" that there was no need to hike immediately.

      McCafferty and Saunders, however, argued that "slack was largely 

used up and pay growth was picking up, presenting upside risks to 

inflation in the medium term."

      Immediate modest tightening "could mitigate the risks from a more 

sustained period of above target inflation," they said.    

-London newsroom: e-mail: david.robinson@marketnews.com    

[TOPICS: M$$BE$,MT$$$$]