The fate of a potential Bank of England interest increase rate on Thursday could lie in the hands of two deputy governors who have stayed silent during the crescendo of bets for an imminent move.
While traders are convinced that the U.K. central bank will deliver its first post-pandemic increase in borrowing costs on Nov. 4, with mortgage lenders already raising the cost of home loans in anticipation of a move. Economists see the decision as more finely balanced.
The result will depend how the nine-member Monetary Policy Committee splits. Two have already voted for tighter policy, albeit not through rate hikes, and another two, including the Governor Andrew Bailey, are expected to join them in a push for higher borrowing costs this week. Three other officials have are seen as firmly dovish, leaving the balance of power in the hands of Ben Broadbent and Jon Cunliffe, who haven’t spoken in public recently about rates.
Here are the nine members of the Monetary Policy Committee, ranked by Bloomberg Economics in order of who’s most likely to support a rate hike this month:
An external member of the MPC, Michael Saunders has a reputation for moving quickly. He’s been among the first to back rate hikes, or cuts, in the past. He was concerned enough about inflation to vote for an early end to the BOE’s bond-buying plan in August and September. When he told The Daily Telegraph that markets were right to price in a quicker pace of tightening, that fueled talk he’s ready to vote for a hike.
Deputy Governor Dave Ramsden voted to curtail quantitative easing purchases last month, putting himself firmly in the hawkish category. While he hasn’t made a major speech since September, he’s previously warned that he is worried about inflation. That’s left economists placing him in the camp very likely to vote for an increase this week.
The BOE’s new chief economist was thought to have hawkish leanings when he took up the role, and his comments since then have reinforced that view. In his first interview, Pill told the Financial Times on Oct. 21 that inflation could exceed 5% in the coming months, a percentage point higher than the current BOE forecast. He described the decision this week as “finely balanced.”
The BOE’s governor has been the most vocal MPC member since September, using a number of public appearances to make it clear he’s increasingly concerned about inflation. That reached a peak when he said the central bank will “have to act” to to curb price gains, supercharging investor bets on action in November. Given that, it would be a bit of a shock if he voted to hold, although HSBC Holdings Plc predict he will hold off for now.
Deputy Governor Ben Broadbent may be the key man next week. He hasn’t spoken publicly since the BOE’s last meeting. A private roundtable where he spoke to bankers in October sparked a flurry of speculation in markets — denied by the central bank — that he had sounded a dovish tone. Whiile Broadbent has a reputation for conformity — he has never cast a dissenting vote on rates — he did go against the majority on QE early in his career.
Jon Cunliffe has spoken a number of times since September, but speeches on financial stability and digital currencies provided no clue as to his policy leanings. He’s seen as the most dovish deputy governor and has dissented against hikes in the past.
Another newer member, Catherine Mann has sounded a more relaxed tone on the prospects for longer-term inflation. In October, she said she “can wait” before raising rates because markets have already tightened financial conditions. She also cautioned the that impact of Britain’s exit from the European Union as well as supply disruptions could mean that firms can pass on prices increases to customers.
Silvana Tenreyro has been the most outspoken dovish member in recent weeks, flagging the risk of a “self-defeating” hike to contain temporary inflation pressures. She warned on Oct. 14 that Britain’s economy remains weak after the worst recession in a century, with output the equivalent of a “full-recession” below its level before the coronavirus hit.
Jonathan Haskel has been notably quiet since September although his reputation as a dove means most expect him to opt to hold rates. He’s never cast a vote for tighter policy in his time at the BOE. In July he said, “the risk of a preemptive monetary tightening curtailing the recovery continues to outweigh the risk of a temporary period of above-target inflation.”