Bank of England to leave policy unchanged in this month's meeting?

Led once again by Martin Weale, mood within MPC is changing gradually. He seemed very close to voting for a rate increase, having last done so in December last year, in his recent interview with financial times. 

The headline said that the MPC should be prepared for an increase as early as August. That means that he and probably McCafferty will soon vote that way but we still think that the majority on the committee is still some way off from following them.

The behaviour of wages which are starting to show more convincing signs of acceleration is the main factor persuading him that the time is close for the first rate increase.

There is rise in oil prices and a timing distortion in air fare prices has been reversed. The goods price inflation is the main uncertainty, which has been depressed by the past appreciation in the pound and it is not yet clear that this downward impact has reached its maximum. 

The MPC is well aware of this effect, Kristin Forbes having highlighted it in recent speeches, and she repeatedly emphasises that these downward effects are transitory. She could easily be the next member to join the two avowed hawks.

"However, this month Weale might not switch back to vote for an increase. This month's meeting should see yet another decision to leave policy unchanged", says Societe Generale.