As expected, the UK MPC continued voting 7:2 against a rate hike, with the same two dissenters. The majority see the euro-area as a risk to the UK recovery. They are concerned by weak wage growth If this is the sentiment before the recent weak data, it is unclear if we will still have two members voting for a hike in November.
GBP/USD extends its slide, getting closer to 1.60.
- The majority see current inflation pressures as not justifying a rate hike.
- They also see a rate hike as leaving the UK vulnerable to shocks.
- The minority wanted to anticipate potential wage hikes before they come.
- Weale and McCafferty are the dissenters, and not for the first time.
The minutes of the latest Monetary Policy Committee’s meeting was expected to show that that once again, two members voted for a rate hike, dissenting against the other 7, including Governor Mark Carney. Worries about the euro-zone, comments about inflation and comments about employment are in the limelight.
GBP/USD was falling sharply towards the publication, trading around 1.6070.
Part of the fall is related to worries about the minutes, but this is also due to the strengthening of the US dollar, which is gaining ground also against other currencies.
It is important to remember that since the MPC meeting on October 9th, we had some downbeat UK data: inflation fell to a 5 year low of 1.2% and jobless claims for September fell less than expected.
Rate hike expectations have been pushed back after these data and the intensifying worries about the euro-zone.