UK interest rates: Two Bank of England committee members unexpectedly vote to increase cost of borrowing immediately

Ian McCafferty and Michael Saunders voted to raise the cost of borrowing to 0.75 per cent

Two members of the Bank of England’s Monetary Policy Committee voted to raise UK interest rates immediately this month.

The bank kept rates steady at 0.5 per cent on Thursday, but two of the nine person MPC, Ian McCafferty and Michael Saunders, voted to increase the cost of borrowing to 0.75 per cent.

Most City of London analysts had expected the MPC to vote unanimously to keep rates on hold in March, although many think rates could go up as soon as May, as UK wage growth, a key metric for the Bank, continues to gather pace.

The pound briefly spiked in the wake of the news, hitting $1.4216, before rapidly descending.

The bank raised interest rates for the first time in a decade last November.

Its latest minutes said: “The best collective judgement of the MPC remains that, given the prospect of excess demand over the forecast period, an ongoing tightening of monetary policy over the forecast period will be appropriate to return inflation sustainably to its target at a more conventional horizon.”

Citing the recent tariff impositions by the Trump administration in the US, the minutes also warned that “a major increase in protectionism worldwide could have a significant negative impact on global growth and put upward pressure on global inflation”.

Mr McCafferty and Mr Saunders were also the first MPC members to start voting for a rate rise in 2017.

The Office for National Statistics reported this week that average wages were up 2.8 per cent in January, the fastest rate of growth seen since September 2015.

The MPC has repeatedly said it is watching wage growth carefully as an indicator of inflationary pressure.

“We are more and more confident that the MPC will hike rates in May.” said Alan Clarke of Scotiabank in response to the minutes.