Bank of England policymakers are concerned that the Greek debt crisis could delay Britain’s first interest rate rise in eight years, but warned that the prospect of a hike is increasing as the UK economy strengthens.
With Brussels and Athens yet to begin formal talks on a third bailout deal, the monetary policy committee (MPC) said the eurozone could falter in the event of renewed infighting and drag down growth.
Uncertainty about the prospects for wage growth also held back the MPC from bringing forward a rates rise, according to minutes of its meeting this month. Instead, the MPC voted unanimously to maintain the base rate at 0.5%.
The minutes said: “For all MPC members, the policy decision this month was clear cut.” For a number of policymakers, however, it was the threat posed by rising wages on the Bank’s inflation target of 2% and not just the “very material factor” of Greece’s debt standoff that influenced their vote to keep rates on hold. “Absent that uncertainty, the decision between holding Bank rate at its current level versus a small increase was becoming more finely balanced,” the minutes said.
At its previous meeting, in June, the Bank said that for two policymakers, the decision rates was already finely balanced.
