However, division continues to remain between the MPC members with the same two voting for a rate cut three times in a row.
Growth on the horizon
The MPC highlighted that since its December meeting, recent indicators suggested that global growth has stabilised, supported by the partial easing of trade tensions and loosening of monetary policy by many central banks over the last year.
Against this backdrop, UK GDP growth is projected to modestly increase in early 2020, driven by a pick up in global activity, a further decline in Brexit uncertainties and the government’s announced spending measures.
The MPC reiterates that monetary policy will be set to ensure a sustainable return of inflation to the two per cent target, and may either need to reinforce the expected recovery in UK GDP growth should the more positive signals from recent indicators not be sustainable or weak, or could see “some modest tightening” if the economy recovers in line with the MPC’s expectations.
The committee discussed rising business confidence and investment intentions domestically, the receding near-term uncertainties facing the UK businesses and households, and the recovery of the housing market indicators and consumer confidence.
The MPC will monitor closely these indicators and other domestic activity data to assess the sustainability of an improved outlook in the coming months.
UK GDP fell in November by 0.3 per cent, and growth on a rolling three-month basis fell to 0.1 per cent due to broad-based weakness in services and manufacturing output.
GDP in 2019 Q4 is likely to be flat versus last quarter, slightly below the MPC’s forecast in its previous meeting.
However, on a positive note, employment growth rose sharply in the three months to November, with the increase skewed towards full-time employees.
Average weekly earnings rose by 3.4 per cent in the private sector. Despite mixed indicators of domestic consumption, consumer confidence picked up in December.
The housing market remained strong and the BoE expects the UK house price index (HPI) to rise strongly in both 2019 Q4 and 2020 Q1.
Graph: UK two-year swap rate expectation