The Bank of England's Monetary Policy Committee voted yesterday on whether or not interest rates will rise, and in previous meetings the members were unanimous against raising rates. The interest rate is to remain at its record low of 0.5% as minutes from the May meeting cited that inflation, now just below zero, is going to remain anemic for the short term; reflecting the drops in food and energy prices. The MPC were also unanimous at 0-9 on keeping the current bank asset purchase programme at £375bn. Although all members were in agreement on holding rates, there were two out of the nine policymakers who were finely balanced between a rate hike and keeping them on hold. It is highly likely that these two members were Martin Weale and Ian McCafferty. This gave Sterling a boost against the Dollar and the Euro.
From across the pond the FOMC released their latest minutes from their last meeting which showed that a rate hike in June is unlikely. Minutes from April's meeting only had a few members think that economic and financial conditions would be sufficient for a June lift off. Many Fed participants thought this unlikely though, citing temporary factors holding the economy back; GDP grew by just 0.2% with weak industrial production and poor housing data for Q1. Data available in June is seen by many members as unlikely to provide sufficient confirmation that conditions for raising rates would satisfy the FOMC targets. The focus will now be on data released from the U.S.
Another busy day in the market with key data released from the UK, Eurozone and the US. Consumer spending will be under the microscope in the UK today as retail sales hit the wires. Meanwhile, key PMI service sector and manufacturing are released from the Eurozone and Germany. US weekly jobless claims will be closely monitored as will the Philly Fed manufacturing index.