Since March 2009, the Bank of England (BoE) has been quite clear that they are not planning on increasing interest rates any time soon.
But things look like they might be changing.In a recent meeting which took place on the 6th and 7th of August, two members of BoE’s Monetary Policy Committee (MPC) voted to raise interest rates in August.
Martin Weale and Ian McCafferty voted for an increase of 0.25% to 0.75%.
Both members suggested that increasing the interest rate earlier could help curb inflationary pressures from wage rises.
This was the first time in three years, since July 2011, that policy makers have voted for an increase.
While the MCP has nine members and requires a majority to change interest rates, the latest 7-2 vote means that these rates will continue at a low of 0.5%.
As a result of this latest vote, the British pound (GBP) immediately advanced 0.20% against the U.S. dollar (USD) to trade at $1.66.
These bank minutes were also released after the quarterly inflation data was revealed and according to the Office for National Statistics (ONS), the average wages, excluding bonuses, increased by only 0.6% in the year to June.
This marked the slowest pace of growth since 2001.
If interest rates are increased now, this will have an impact on those with mortgages, debts and savings accounts and will also impact the profitability of companies as well as the rate of economic growth.
The value of the GBP will also strengthen together with the value of share prices.
Despite the recent vote for a change in the interest rates, Mark Carney, the Bank Governor, has stated that any rise will be gradual and is not likely to occur before the General Election in May 2015.