Bank Of England 'Closer To Rate Rise Move'

The Bank of England's interest rate-setters were surprised that the financial markets had not priced in a rise this year, it has emerged.

Minutes of the latest meeting of the Monetary Policy Committee (MPC) showed that while there was no support on the nine-member panel for an increase in bank rate this month, such a move was nearing.

The document said the members found it "somewhat surprising" that markets attached only a relatively low probability to a hike by the end of the year.

The view echoes remarks by Bank governor Mark Carney in his Mansion House speech last week that the first hike in interest rates could come sooner than expected.

Martin Weale has been on the MPC since 2010

The minutes recorded: "For some members the policy decision had become more balanced in the past couple of months than earlier in the year."

The MPC cited the rapidly improving picture for employment and the wider economy.

Fuel was added to the speculation around a rise this year when an external member of the MPC, Martin Weale, used a speech in Belfast on Wednesday to argue the case for an increase from the record low of 0.5%, adopted in March 2009.

He said the Bank could afford to tighten monetary policy slightly, even if slack in the economy was greater than employment figures suggest.

While acknowledging that wage growth was still unusually weak, he said monetary policy would still provide a great deal of support for the economy even after bank rate had started to rise gradually.

In the three months through April, total pay including bonuses rose a yearly 0.7%, slowing from 1.9% in the three months to March.

In the month of April alone, total pay fell by 1.7% compared with the same month last year.

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