Bank of England's rate-setting body witnessed a growing divide at the June meeting, after its chief economist Andrew Haldane joined the hawks seeking an interest rate hike. Policymakers also set out new guidance on when to consider reducing the quantitative easing programme.
Six members of the Monetary Policy Committee including Governor Mark Carney voted to maintain the benchmark rate at 0.50 percent, while three members preferred a quarter-point rate hike, the bank said in a statement on Thursday.
Haldane joined Ian McCafferty and Michael Saunders in the rate hike call as they had a higher degree of confidence that the slowdown in the first quarter was temporary or erratic and would largely be unwound.
All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.
All nine members voted to maintain quantitative easing at GBP 435 billion.
The MPC said it intends not to reduce the current stock of purchased assets until Bank Rate reaches around 1.5 percent compared to the previous guidance of around 2 percent. Any reduction in the stock of purchased assets will be conducted at a gradual and predictable pace, the bank said.
Inflation is expected to pick up slightly more than projected in May in the near term, reflecting higher dollar oil prices and a weaker sterling exchange rate. Domestic cost pressures is expected to continue to firm gradually as labor market remains tight.
All members agreed that the slack in the labor market was largely used up. Pay and domestic cost growth had continued to firm broadly, as expected.
No separate press conference is held after the rate decision announcement, but Carney is set to speak at dinner at the Mansion House, London, later today.
James Smith, an ING economist, said an August rate hike is still more likely than not. While the Bank has not offered any firm signals or commitments this time, the overall outlook and tone suggests they'd still like to raise rates the data allows, the economist noted.