MNI BRIEF: BOE MPC Splits To Fore In TSC Hearing

Divisions and doubts remain amongst policymakers on the Bank of England's Monetary Policy Committee ahead of the September meeting, evidence given to the Treasury Select Committee Wednesday showed.

Silvana Tenreyro, who dissented against August’s eventual 50bps hike with a vote for a 25 bps, said in her written report that the economic slowdown, with a growing output gap and higher unemployment, is "likely to weigh heavily on domestic inflationary pressures, contributing to a fall in inflation below target in the medium-term". She advocated for "gradual rate rises" as they allowed policymakers to "react before we tighten too far into contractionary territory."

Her colleague Catherine Mann reaffirmed her case from Sept. 5 for "A more forceful set of moves in Bank Rate earlier on opens the potential for a policy hold, or even reversal, later." Chief economist Huw Pill said net-net he expected the government fiscal support package to lower short-term inflation, due to the energy price cap, but the effects on policy relevant medium-term inflation were uncertain due to the offsetting support for consumption. Markets have been largely pricing in a 75bps hike in September but divisions on the MPC look near inevitable.