The Bank of England decided to keep its key interest rate unchanged, but in a split vote as the minority sought immediate tightening citing easing slack and accelerating pay growth.
At the rate-setting meeting, the Monetary Policy Committee, governed by Mark Carney, voted 7-2 to maintain the benchmark rate at 0.50 percent. The bank had previously raised its key rate in November 2017, which was the first hike in a decade.
Policymakers unanimously decided to maintain the quantitative easing at GBP 435 billion.
Ian McCafferty and Michael Saunders preferred a quarter point rate hike. They viewed that a modest tightening at this meeting could mitigate the risks from a more sustained period of above-target inflation.
They also argued that the slack was largely used up and pay growth was picking up, presenting upside risks to inflation.
Official data on Wednesday showed that wage growth accelerated at the fastest pace in more than two years in the three months to January, raising hopes of a rate hike.
Seven members thought that the current policy stance remained appropriate to balance the demands of the MPC’s remit, the bank said in the statement.
“The May forecast round would enable the Committee to undertake a fuller assessment of the underlying momentum in the economy, the degree of slack remaining and the extent of domestic inflationary pressures,” the bank said.
Hinting at a rate hike in May, policymakers said an ongoing tightening of monetary policy over the forecast period will be appropriate to return inflation sustainably to its target at a more conventional horizon.
All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.
The bank staff forecast the economy to grow 0.3 percent in the first quarter after adjusting the impact of snow.
Further, the BoE cautioned that a major increase in protectionism worldwide could have a significant negative impact on global growth and put upward pressure on global inflation.