Bank of England MPC unanimous on holding rates

All nine Bank of England policymakers voted to hold interest rates at 0.5% in July, minutes of the meeting show.

However, there were signs some Monetary Policy Committee (MPC) members are edging closer to backing a rate rise.

The minutes said "a number" of MPC members saw a rising risk of UK inflation heading above the 2% target in the medium term.

For these members, the uncertainty around the Greek debt talks was a key factor in voting to hold rates.

"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.

However, the minutes said that for most members, keeping rates on hold would still have been appropriate even without the problems in Greece and the volatility in China's financial markets.

'Hawkish mood'

Some analysts expect the unity among MPC members to end in August when the Bank publishes a quarterly update of its forecasts for the UK economy.

Figures from the Office for National Statistics released last week showed average weekly earnings including bonuses rose at an annual pace of 3.2% in the March-to-May period, the fastest rate in five years.

This has increased concerns among some that rising pay could start to push up inflation, even though the CPI inflation rate fell back to 0% in June.

Markit chief economist Chris Williamson said the minutes "reveal a mood of hawkishness developing steadily among policymakers".

"Although most members would still have seen holding rates as the most appropriate stance, the minutes suggest that two members - most likely Ian McCafferty and Martin Weale - are clearly inching towards voting for borrowing costs to start rising," Mr Williamson said.

Mr McCafferty and Mr Weale were the two MPC members who voted for a rate rise between August and December last year.

Last week, Bank of England governor Mark Carney indicated that interest rates may rise "at the turn of this year".

And MPC member David Miles, who was once one of the strongest advocates for keeping rates on hold, said last week that holding off on a rate hike for too long would be "a bad mistake".

Rate hike timing

However, a majority of members voting in favour of a rate hike "still looks a long way off," said Martin Beck, senior economic advisor at the forecasting group EY ITEM Club.

"Recent falls in the price of oil and energy could contribute to inflation falling into negative territory in the next few months," he said.

"Moreover, were the UK to be the first major economy to undertake rate 'lift-off', the already sizeable upward pressure on sterling could accelerate significantly, hitting exporters and undermining the prospect of inflation returning to the 2% target," Mr Beck added.