UK rate rise unlikely to happen until 2015

The Bank of England holds its monthly policy meeting this week, with signs that the Monetary Policy Committee is moving gradually towards a decision to hike interest rates.

Its August meeting marked the first time under governor Mark Carney, who took over in July 2013, that there has been voting dissent within the committee. The dissent was in the form of two of the nine members voting for a rate hike.

A key dilemma and source of uncertainty/disagreement in the committee’s policy deliberations is the conflicting signals over the degree of slack in the labour market. The concept of ‘spare capacity’ in the economy is the basis of the bank’s current forward guidance on interest rates.