LONDON: Bank of England officials discussed in July whether there was a case for an early rate rise to cool Britain’s economy, but were held back in part by strikingly low wage growth and signs of weakness abroad.

The nine members of the Monetary Policy Comm­ittee were unanimous when they voted to keep interest rates on hold at their July 9-10 meeting, as forecast by a Reuters poll.

Sterling fell and British government bonds underperformed German debt after the release of the minutes, which offered little to bolster expectations among many in the market that a rate rise will come later this year.

The Bank also said there were signs, most clearly in the housing market, that Britain’s growth – which has been the fastest among the world’s big rich economies – would slow a bit in the second half of 2014.

Much of the MPC’s discussion centred on the confusing picture from Britain’s labour market, which has seen rapid job creation and the highest ever number of people in work, but also some of the slowest wage growth in years.

Policymakers were unsure if this reflected a slightly longer than normal lag between unemployment falling and wages starting to rise, or if the economy and employment had more scope to grow before consumer price inflation rose.

Data released after the MPC met showed that annual wage growth fell to a five-year low of 0.3

per cent in the three months to May, though tax changes have muddied the data.—Reuters

Published in Dawn, July 24th, 2014