The MPC’s latest decision was ‘hold’ and a rise looks a long way off. In fact, the focus has turned back on to whether the Bank of England will return to money printing rather than when it might increase borrowing costs.
The MPC voted 9-0 in favour of holding rates in August – (the September voting pattern and meeting minutes will be published tomorrow). The vote had been locked at 7-2 for two months and it was 6-3 before that.
That shift reflects the remarkable and rapid movement in forecasts for rates over the summer, with predictions for the first rise, week by week, taking huge strides into the future.
In June, the prediction had been for an increase in July or August 2012. And earlier this year, futures markets were even indicating at one point that a rate rise was imminent.
But by the start of August, futures markets were pencilling in early 2013 for the first increase. Now, following the massive stock market turbulence and government debt fears, markets are oscillating between a suggestion the first rise being in late 2014 or early 2015