Bank of England Deputy Governor Ben Broadbent said last Friday’ “Keeping British interest rates on hold this month was a straightforward decision, as it made sense to wait and see if first-quarter economic weakness was temporary.”
The Bank of England (BoE) had said on Thursday that it would look for signs over the coming months that the economy is picking up before raising rates again, which Governor Mark Carney said was likely to be before the end of the year if all went well.
“It is entirely the sensible thing to do, to wait to see whether we are right that the economy will bounce back from here, and for me the decision was straightforward,” Broadbent said in a BBC radio interview.
At the Monetary Policy Committee’s (MPC) meeting 2 of its 9 members voted to raise rates to 0.75 percent from 0.5 percent this month. Their argument was that by delaying a rise in the face of weak growth that looked temporary there would be a risk of more abrupt hikes becoming necessary later.
The MPC voted to keep rates on hold. A few weeks ago, the markets were strongly expecting a May rate rise. However, after economic data showed increasing evidence of a first-quarter slowdown, as well as remarks from BoE governor Mark Carney that the data had been “mixed” and the MPC was divided, expectations had widely faded.
Nonetheless, sterling fell near to a four-month low against the U.S. dollar on Thursday after the BoE kept its options open on the timing of future rate rises.
Some economists have complained that the BoE has given confusing messages this year, not for the first time. Analysts at brokerage Hamilton Court FX said on Friday.
“A 7-2 vote against a hike and his reputation as an ‘unreliable boyfriend’ mean that (Carney)’s going to have to work harder to convince us of the fact that they will get rates above a level they’ve not passed for almost a decade,”
The deputy governor of the Bank of England, Broadbent said the message from the BoE in February that interest rates might need to rise somewhat sooner and to a slightly greater extent than markets had expected was explicitly conditional on growth performing in line with BoE forecasts.