MPC split on interest rates decision

The Bank of England's Monetary Policy Committee (MPC) is split on a decision over whether or not to increase interest rates.

Minutes from the meeting on August 6th and 7th showed that two members of the MPC voted in favour of a 0.25 per cent increase to 0.75 per cent. Both Ian McCafferty and Martin Weale felt it was time for an interest rate rise but were outvoted 7-2 allowing the Bank of England to keep interest rates at the historic low of 0.5 per cent.

It is the first time the MPC has been split on interest rates since July 2011 although it was not enough to manoeuvre from the 0.5 per cent, which rates have stood at since March 2009. Mr Weale and Mr McCafferty believed that falling unemployment could see an increase in salaries over the coming months, despite recent Office for National Statistics (ONS) figures showing just a 0.6 per cent rise in wages.

They argued that a 0.25 per cent rise would mean monetary policy would stay "extremely supportive" citing that prior to the 2008 financial crisis "normal" interest rates were, on average, around five per cent.

Peter Hemington, partner at BDO, told the BBC: "There are still big question marks for businesses on when the rise might come. Businesses cannot plan for growth on the basis of vague or conflicting statements – policymakers can do more to provide certainty for businesses, enabling them to make informed decisions for the future."

Following the announcement by the Bank of England earlier in the month, which confirmed interest rates would be remaining at 0.5 per cent, governor Mark Carney added a word of warning. Mr Carney explained that while rates currently remain at a historic low rate, this was expected to change by the end of the year.

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