Rate rise still on cards despite unanimous MPC decision to hold

City analysts held firm to the belief that the Monetary Policy Committee could raise interest rates next month even though minutes published yesterday showed that its nine members had voted unanimously for no change at last month's meeting.

City analysts held firm to the belief that the Monetary Policy Committee could raise interest rates next month even though minutes published yesterday showed that its nine members had voted unanimously for no change at last month's meeting.

Nor did figures reporting weaker than expected sales on the high street in September dent expectations of a further increase in the cost of borrowing.

Most economists pointed to earnings growth above the Bank's 4.5 per cent comfort threshold, revealed by figures published after the last MPC meeting, as the main concern. Pay rises were also highlighted as a danger by the Chancellor in his Mais Lecture earlier this week.

"The MPC will not want to risk headline average earnings coming in above 4.5 per cent for a third successive month without having made another pre-emptive strike," said Adam Law of Barclays Capital.

Economists also expect figures due tomorrow to show the economy expanding by 0.8 per cent in the third quarter, a marked pick-up from earlier in the year.

"Given the economy's soft landing, it will not be long before such growth rates use up what spare capacity there is, putting upwards pressure on prices," said Richard Iley at ABN-Amro.

According to the minutes of the 6-7 October meeting , higher market interest rates, higher fixed mortgage rates and the increase in the pound since the surprise rate rise in September were all reasons for holding the official rate unchanged.

The minutes also addressed the possibility that structural change in the economy meant higher growth would not lead to as much of a rise in inflation as in the past.

This was the conclusion drawn by DeAnne Julius, one of the most prominent MPC doves, in a speech at the University of Birmingham yesterday.

She said: "There is considerable evidence in the UK to suggest that long-term structural changes are bringing effective downward pressures to bear on prices and margins even during times of relatively robust demand." I

Yesterday's figures painted a picture of healthy economic growth. A modest 0.1 per cent rise in retail sales volumes in September left the 3-month growth rate unchanged at 1.3 per cent. The Office for National Statistics said the underlying trend had picked up in recent months. Food sales increased while sales of clothing and household goods declined during September.

Separate figures for bank and building society lending in September showed mortgage lending remained, at £7.9bn, substantially higher than a year earlier, although it dipped from August's level.

The Council of Mortgage Lenders said the housing market had reached a plateau.

News
election 2015The 10 best quotes of the campaign
News
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
News
people
Voices
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Editor-in-chief - Financial Services - City, London

    £60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Guru Careers: Management Accountant

    £27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

    Guru Careers: Project Manager / Business Analyst

    £40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

    Day In a Page

    General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

    'We will not sit down with Nicola Sturgeon'

    In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
    VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

    How ordinary Britons celebrated VE Day

    Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
    They came in with William Caxton's printing press, but typefaces still matter in the digital age

    Typefaces still matter in the digital age

    A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
    Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

    'Missing link' between Earth's two life-forms found

    New microbial species tells us something about our dark past, say scientists
    The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

    Pan Am Experience: A 'flight' back to the 70s

    Tim Walker checks in and checks out a four-hour journey with a difference
    Humans aren't alone in indulging in politics - it's everywhere in the animal world

    Humans aren't alone in indulging in politics

    Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
    Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

    Crisp sales are in decline

    As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
    Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

    Ronald McDonald the muse

    A new wave of artists is taking inspiration from the fast food chain
    13 best picnic blankets

    13 best picnic blankets

    Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
    Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

    Barcelona vs Bayern Munich player ratings

    Lionel Messi scores twice - but does he score highest in our ratings?
    Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

    Explosive batsman who sets the range for Kiwis' big guns

    Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'