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BoE Minutes: MPC voted 7-2 to keep interest rate steady

FXStreet (Łódź) - BoE Minutes from the MPC monetary policy meeting held on 3 and 4 September and released today reveal that the Committee voted 7-2 in favor of maintaining the interest rate at the record low of 0.5% and unanimously opted for keeping the program of asset purchases steady at £375 billion. This outcome is in line with market consensus.

Ian McCafferty and Martin Weale were the MPC members who preferred to increase the interest rate by 25 basis points to 0.75%, arguing that robust UK economic growth justified a hike, and that a sharp pickup in wage growth would be seen along with the absorption of slack. An early interest rate rise would also allow for a gradual tightening, they suggested.

On the other hand the remaining seven MPC members didn't see an early rate rise justified by the current UK inflation projections, which point to CPI falling somewhat in the coming months and then rising again towards the end of the year.

They argued that "a premature tightening in monetary policy might leave the economy vulnerable to shocks, with the scope for any stimulus that subsequently became necessary being limited by the effective lower bound on Bank Rate."

They also said that highly indebted households could suffer if a rate hike was conducted before a pickup in wage and income growth was evident.

The sterling jumped on the news to 1.6336 before dropping again to 1.6302.

GBP/USD spiked to 1.6335 on data, but reversed the move soon

GBP/USD managed to break above 1.63 resistance before the UK data release, and moved to1.6335 high post the reports.
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