Bank of England Keeps Interest Rates at 0.5 Percent on Weak Wage Growth
Panelists at the Bank of England voted Wednesday to keep interest rates at record lows of 0.5 percent on a weak wage-growth report, according to the minutes released by the bank.
The nine members of the bank's Monetary Policy Committee (MPC) voted unanimously to hold down interest rates as wages continued to show bleak growth despite a robust hiring season.
According to the latest wage growth report, total average wages in the U.K. rose only 0.9 percent for three months ended April, the slowest pace since November. But another report, The EY ITEM Club, claims that there will be slow recovery in wages this year with real incomes "growing from 1.8 per cent in 2014 to 2.2 per cent in 2016."
The MPC panel may have voted unanimously for the rate cap but for some members, the decision was "more balanced," according to the Guardian.
"Against this backdrop, the committee agreed that no increase was warranted at this meeting, although for some members the decision had become more balanced in the past few months than earlier in the year," the minutes states.
However, the MPC insinuated that rates would be hiked gradually depending on the future inflation and wages report.
"A rise in Bank Rate at a time when the economy was growing strongly would facilitate a more gradual path thereafter and would allow the Committee to evaluate the sensitivity of households, firms and financial markets to changes in interest rates, following a long period during which Bank Rate had remained unchanged."
The MPC did not assert when it would raise the rates though. Analysts are also split on the decision of raising interest rates now.
"We still don't know when interest rates will rise and businesses cannot plan for growth on the basis of vague or conflicting statements. Policy makers can do more to provide certainty for businesses, enabling them to make informed decisions for the future," Peter Hemington, Partner at BDO, an accounting and business consultancy told BBC.
