UK's first hike not around the corner yet

While UK inflation stood at zero in August and reflects unusually low contributions from energy, food and imported goods prices, also core inflation remains subdued at around 1%. The low core number is influenced both by restrained labour cost growth and by muted import cost growth. 

The BoE noted that although rising, increases in labour costs remain lower than would be consistent with meeting the inflation target in the medium term, were they to persist at current rates.

"With inflation below the target, and the likelihood that at least some spare capacity remains in the economy, the MPC intends to set monetary policy so as to ensure that growth is sufficient to absorb any remaining underutilised resources. In other words, the first rate hike is not around the corner yet", says Nordea Bank.

However, there was increasing evidence of developing capacity pressures in some segments of the economy, and of labour skill shortages in particular. Upward pressure on wages should thus follow.

Ian McCafferty remained the only member of the MPC to call for higher rates, in line with the month earlier.