First MPC vote for BOE rate hike to come by Aug: poll

British cbank chief demands ethical aproach

LONDON, May 28, (Agencies): The first individual vote for policy tightening at the Bank of England is likely to come in the next few months but it will be April at least before interest rates rise, a Reuters poll found on Wednesday.

The Bank Rate was cut to just 0.5 percent over five years ago as the economy tanked but with a recovery looking ever more solid, the BoE is widely expected to be the first major central bank since the global financial crisis to begin tightening policy.

None of the 52 economists polled this week expects any move on June 5 and median forecasts predict it will be the second quarter of next year before a majority of the nine-strong Monetary Policy Committee votes to raise the Bank Rate — and even then by only 25 basis points.

But that was a close call: 25 of the 52 said the first move would come before then, a much stronger minority than in a poll taken ahead of this month’s policy-setting meeting when 24 of 61 expected an earlier hike.

Minutes from the MPC’s May meeting highlighted growing differences about when to start reining in the recovery and some of its top officials believed the case for keeping rates on hold was now more finely balanced.

“We continue to expect a 2015 not a 2014 first rate rise, but this set of minutes suggests that the first dissenting vote for a rate rise may happen by the August meeting,” said Melanie Baker at Morgan Stanley.

All 30 economists who answered an extra question on the issue said the first vote for an increase would come by the end of the year and 19 of them said at least one of the MPC would break rank in August or earlier.

The BoE has signalled it might start raising rates in about a year’s time but its plan to increase rates only gradually may mean it should move earlier than would otherwise be the case, its deputy governor, Charlie Bean, said on Sunday.

Britain’s economy is expected to enjoy solid growth in the coming quarters, and the Bank is keen not to stifle that, but inflation is not forecast to reach the BoE’s 2 percent target until the second quarter of next year, around the time when it is first expected to hike rates.