BoE's minutes show policy makers split 7-2 over interest rates

Two out of the nine-member Monetary Policy Committee (MPC) of Bank of England (BoE) voted to raise benchmark interest rate, according the central bank's meeting minutes published on Wednesday.
It is the first opinion split of the MPC in more than three years.
The BoE announced on August 7 after a two-day meeting that Bank Rate would stay at 0.5 percent and the stock of asset purchases, or quantitative easing policy, at 375 billion pounds (or 625 billion U.S. dollars).
JUSTIFICATION
In the meeting minutes, the MPC said external members Ian McCafferty and Martin Weale voted against the proposition, preferring to increase Bank Rate by 25 basis points, or 0.25 percent, to 0.75 percent while the other seven members voted in favor of maintaining the ultra-low interest rate.
The two members believed that the economic circumstances were "sufficient to justify an immediate rise in Bank Rate".
"These members noted that the continuing rapid fall in unemployment alongside survey evidence of tightening in the labor market created a prospect that wage growth would pick up," said the minutes.
They also argued that it was possible that wages were lagging developments in the labor market to some extent. If that were true, wages might not start to rise until spare capacity in the labour market were fully used up, the minutes said.
British unemployment rate dropped to 6.4 percent in the three-month to June 2014, down from 6.5 percent in the three-month to May, and recording the lowest level since late 2008, data showed by the Office for National Statistics (ONS) last week.
Meanwhile, in the same period, British employees' total pay was 0.2 percent lower than a year earlier, with pay excluding bonuses was merely 0.6 percent higher, data also showed.
Regarding the stock of purchased assets, the Committee voted unanimously in favor of maintaining the current scale, said the minute.
TIMING UNCHANGED
Though the latest BoE's minutes fueled the expectation of the first interest rate within this year, the majority of economists here still believed that it will not happen until the early 2015.
Samuel Tombs, Senior UK Economist at Capital Economics, said in an analysis piece that the minutes suggest that it would be foolish to rule out the possibility of a 2014 rate hike.
However, Tombs admitted that the data released since the BoE's August meeting have eased the pressure on the Committee to tighten quickly. For instance, British inflation rate dropped to 1.6 percent in July, markedly lower than the 1.9 percent a month earlier.
"For now, then, we still expect the first hike to come in February 2015. But, even if the Committee decides to get on the front foot and raise interest rates before the end of the year, low inflation should ensure that the pace at which the rise is extremely gradual by historical standards," noted Tombs.
Martin Beck, senior economic adviser to the EY ITEM Club, also commented in a note:" A minority of members appears to be supportive of a rate hike, but the absence of inflationary pressure and the risks involved in tightening policy make it difficult to see majority support for a hike emerging in the near future."
The London-based economic think-tank maintains its view that a rate hike will have to wait until 2015.