The value of the British pound fell against the dollar and euro yesterday, following widespread surprise that only one Monetary Policy Committee (MPC) member at the Bank of England voted for a base rate rise.
The MPC is made up of nine senior financial experts and only one – Ian McCafferty – voted for an immediate rate rise even though it was expected that more panel members would have voted in the same way.
At the last meeting of the MPC, all nine members voted in favour of maintaining the record low base rate of 0.5 per cent.
Following publication of the MPC’s meeting minutes and rate decision, Sterling fell to $1.5555, having been at $1.5613 before the information was released.
The message from the vote, combined with inflation forecasts, is that the UK economy is not yet robust enough to warrant a rate rise, and experts are claiming that it is increasingly unlikely that an increase will happen before the end of 2015.
However, what is clear is that it is likely to happen in the near future, and the industry-wide expectation is that it will happen before summer 2016.
Despite a lack of inflationary pressures, sterling value has been bolstered in recent weeks by positive economic data.
Furthermore, British consumer demand appears to be remaining at a consistently high level, while wages continue to rise and growth is still occurring.