pound_coinIs that an imminent increase in interest rates in the offing? Well, the latest move by the Bank of England suggests it might be, on the other hand...The Bank of England's monetary policy committee, or MPC if you like your news on interest rates to be more racy, meets up most months. But this month, two of the nine members voted for an increase in interest rates. Does that mean the writing is on the wall, as well as in the minutes of the MPC, and a rate hike is imminent?Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics is not so sure.He put it bluntly: "Ignore the two members voting to raise rates now; hawkish minorities can persist for many meetings." He continued: "It's . . . likely [that the] the MPC chose not to signal an imminent rate hike because its confidence has been undermined by sub-par data since its last meeting. While the Committee said that it would wait until May to undertake a fuller assessment of the underlying momentum in the economy, it revised down its forecast for quarter-on-quarter GDP growth in Q1 to 0.3 per cent, from 0.4 per cent. This largely was due to the heavy snow in late February, but it also reflected weak construction output data for January. The Committee also asserted that it would be "difficult to quantify" the damage that the bad weather would do to Q1 GDP, suggesting that a weak print could make it refrain from taking a decisive step in May. In addition, the Committee acknowledged that February's 2.7 per cent rate of CPI inflation was below its 2.9 per cent forecast.He concluded: "If . . . activity and inflation data continue to surprise to the downside, as we expect, then we think that a majority of members will be content to wait beyond May to raise rates again. The If, however, activity and inflation data Committee's minutes are deliberately ambiguous so that nobody can levy the "unreliable boyfriend" criticism if they hold back from hiking in May. We see only a 40 per cent chance of a May rate hike and still think the Committee will delay tightening until August."

By contrast, David Lamb, head of dealing at FEXCO Corporate Payments focused on the reaction of the currency markets which seem to have concluded that rates are going up soon. The pound rose on this speculation.

Mr Lamd said: "Good news has come in twos for the pound this week. Stoked first by Monday’s Brexit breakthrough and then decent wage growth numbers, sterling is now reveling in the conversion to the hawkish camp of two members of the Bank of England’s interest rate-setting committee. While the Monetary Policy Committee’s statement was a vintage piece of non-committal hedging, the fact that two Bank grandees voted for an immediate rate hike has prompted the markets to start betting that UK interest rates will finally rise in May. Though this has helped lift the Pound a touch, the MPC’s decision was priced in and came as no surprise – meaning the Pound has been unable to continue the breathless ascent it has been enjoying all week. So sterling’s brief surge to a seven-week high against the Dollar and its fleeting foray past €1.15 against the Euro – its strongest level since June 2017 – are likely to be the high water mark for now. Nevertheless we are seeing a gradual shifting in the Bank of England’s tectonic plates. With the UK economy stabilising – if not yet shining – in the wake of its Brexit-induced funk, the Bank is looking increasingly determined to take it off monetary policy special measures. Interest rate rises are coming, and coming soon, and the Pound is on a roll as a result.”