August interest rate rise moves step closer


The Bank of England has held interest rates but signalled an August rate rise is more likely than previously thought.

In a decisive move, Andrew Haldane, the Bank’s chief economist, joined two other Monetary Policy Committee members in voting to raise rates to 0.75%.

The nine-member MPC was split 6-3, with Bank governor Mark Carney leading the group who voted to hold rates at 0.5%.

The last time three people “dissented” from the overall view, in June 2017, rates rose the following November.

But economists believe that if the economy does show signs of picking up, an August rise is in play. Government borrowing figures published on Thursday boosted hopes among some economists that the economy may be gaining momentum.

The pound jumped by about a cent against the dollar following the Bank’s decision, climbing back above the $1.32 level, as the possibility of an August rate rise appeared to increase.

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The MPC said that the poor economic growth figures of the first three months of a year was likely to prove “temporary” and that the speed of growth would pick up.

As economic momentum improves, fears over rising inflation grow and pressure increases for interest rates to rise.

The level of interest rates is the Bank’s main tool for controlling any increase in prices.


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