MPC members advocate 'wait and see' approach to interest rates

In a speech given in London yesterday, Michael Saunders said that at present, "inflation is reasonably well behaved" and economic growth is not strong enough to create excess demand.

Additionally, he said mortgage and savings rates are becoming less receptive to rate rises, with the average mortgage rate increasing by only 10-15bps around the August 2017 rate rise.

Saunders added that under a smooth Brexit scenario, economic uncertainties would begin to fade and UK growth would likely strengthen, requiring a gradual monetary tightening.

However he said the possibility that monetary tightening might be needed in the future "does not necessarily mean we need to tighten now".

Saunders concluded that a "range of alternative Brexit outcomes are possible, and these may have very different implications for the economy and monetary policy".

Additionally, MPC member Silvana Tenreyro said today that she saw "little case for a policy change" at the latest meeting due to weakening demandand a range of possible outcomes regarding EU withdrawal.

In a disorderly Brexit, Tenreyro said "a situation where the negative demand effects outweigh those other effects is more likely, which would necessitate a loosening in policy".

However she concluded that "it is easy to envisage other plausible scenarios requiring the opposite response".

In the event of a smooth Brexit, Tenreyro said she expects to see a "small amount of tightening" over the next three years, but would "want to be confident that demand was growing faster than supply" before voting for any rate rises.