At its meeting in early September, the Bank of England’s Monetary Policy Committee (MPC) voted to hold interest rates at 0.5 per cent by an eight to one majority; Ian MacCafferty was the dissenter who voted for an increase in the interest rate by 0.25 per cent. Andy Haldane, the Bank of England’s economist and another of the nine MPC members, voted to maintain the interest rate but has recently been expressing concerns about the disinflation and deflation recorded around the globe and has suggested that a cut in interest rates may be needed to combat low inflation. Other members, however, including Martin Weale and Kristin Forbes, have indicated their belief that interest rates will need to rise sooner rather than later.
Just a few days after the MPC meeting, the Office for National Statistics (ONS) announced that the UK’s inflation rate fell to zero per cent in August, down from July’s rate of 0.1 per cent, apparently due to a smaller rise in clothing prices from a year ago and cheaper fuel prices. The Retail Prices Index (RPI) measure of inflation rose to 1.1 per cent from 1.0 per cent in July.
Hard on the heels of that news, the ONS further reported that the unemployment rate for the May to July quarter was 5.5 per cent, unchanged from the previous quarter but down from 6.2 per cent last year. It also announced that average earnings grew by 2.9 per cent between May and July compared with the same period last year – some analysts have speculated as to whether this news might bring forward a hike in the interest rate.
Meanwhile, The British Bankers’ Association (BBA) reported a pick-up in mortgage activity in August, believed to be due to expectations that an interest rate rise was in the offing. 80,221 home loans were approved by the major High Street banks of which more than half were for house purchases, while remortgaging accounted for 32 per cent of the loans, the highest level for four years.
Seasonally adjusted figures from HM Revenue and Customs (HMRC) show that 106,480 homes were sold during August, more than in any month since February 2014; it is the third month in a row that sales of more than 100,000 were recorded.