As this extract from the Minutes shows the BOE is still in a very delicate position and one, which I have argued for a long time, they simply didn’t see coming
There was a risk that growth might soften further than anticipated and, even absent that, a risk that inflation might persist below the target for longer than expected. This latter risk had, if anything, been exacerbated by the continued decline in oil prices. A premature tightening in monetary policy would leave the economy vulnerable to shocks, with the scope for any stimulus that subsequently became necessary being limited by the effective lower bound on interest rates.
Against this, however, there was also a risk that the degree of spare capacity could be eliminated more quickly than previously assumed, particularly if Bank Rate were to follow the path implied by market yields which had declined further on the month.
This could occur if, for example, there were less spare capacity in the economy than currently believed or if growth in major export markets were stronger than expected. That could result in inflation rising to, and subsequently overshooting, the 2% target.
As before, individual members ascribed different probabilities to these risks
The if’s, what’s and maybe’s are plain to see and while today’s headline data on wage growth is to be welcomed there are other nasties lurking around for the UK both internally ( household debt levels being a major one ) and externally (perm any three from many) before the BOE can be anywhere near hiking rates before the end of next year at the very earliest
