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

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