Posted on Wednesday 20 August 2014 by Ulster Business

Interest rate hike edges closer

Bank of England governor Mark Carney could be forced to raise rates in the coming months

A hike in borrowing costs in the coming months is becoming more likely after it was revealed some members of the committee which sets UK interest rates are in favour of the move.

Minutes from the latest monetary policy committee at the Bank of England showed the strongest swing in support of an interest rate hike for more than three years, with two members of the nine-strong group voting to raise rates in August.

Interest rates have been kept on hold at a half of one percent since March 2009 and it’s the first time the vote has been split since 2011.

Markets had predicted a hike in rates at the end of 2014 or early 2015 but the insight into the central bank’s thinking has made some question whether a move is likely sooner.

Governor Mark Carney had pledged to refrain from lifting rates until the economy across the UK is ready.

It had been thought the buoyant housing market in the south east of England and a UK-wide fall in unemployment would force the bank to act but unimpressive wage growth had helped temper the pressure from those areas.

And news consumer price index inflation fell to 1.6% last month and remains well below the Bank of England’s target of 2% had also made a rate hike in the short term appear less likely.

Nevertheless, two votes for an increase in rates by the MPC will be enough to keep markets on edge.


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