Haldane Joins BOE Hawks, Raising Chance of Summer Rate Hike

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The BOE's decision came hours after Norway's central bank fine-tuned a plan to raise interest rates for the first time in seven years.

After the news that Mr Haldane has joined those pressing for a rise - MPC members Ian McCafferty and Michael Saunders - it is likely the market expectation for a rate rise will strengthen. Haldane's support for a rise saw him join two external members of the committee, and raised expectations among economists and markets that a rate rise soon is now more likely.

Carney said the latest additional capital means the Monetary Policy Committee could, if necessary, re-launch the TFS in future on the Bank's balance sheet, cementing 0 percent as the lower bound.

When the Bank of England held rates at its May meeting it was merely reaffirming what governor Mark Carney had warned the markets about only a few weeks previously at the International Monetary Fund meetings in Washington.

He added: "Sterling jumped on the news, gaining nearly a cent against the dollar as traders factored in a bigger chance of a move in August".

"Historically we've seen lenders begin increasing their rates in the weeks leading up to an anticipated base rate rise". That echoes the bank's guidance on interest rates, which they say will rise in a gradual pace and to a limited extent.

With the majority, including Governor Mark Carney, voting for no change, the benchmark rate stayed at 0.5 percent.

Ultimately monetary policy doesn't operate in a vacuum and the Bank of England probably wants to put a floor under the pound against the United States dollar, given that it is now within touching distance of 1.30 having been above 1.42 only two months ago.

The Banks of England has been holding off raising interest rates as it awaits an improvement in the economy, which grew just 0.1% in the first three months of the year.

"August would be too much of a gamble and (we) see November as the next best opportunity for a hike, assuming data strengthens more than we expect and that Brexit remains free of major disruption", Barclays economists Fabrice Montagne and Sreekala Kochugovindan said.

CPI inflation was 2.4% in May, unchanged from April, but is expected to pick up by slightly more than projected in May in the near term, reflecting higher dollar oil prices and a weaker sterling exchange rate. But he did endorse the MPC's new guidance on how long it will wait before reversing past asset purchases.

For the three calling for a hike, the minutes revealed "these members had a higher degree of confidence that the slowdown in the first quarter was temporary or erratic and would largely be unwound".