Excerpts from the Minutes of the MPC meeting held on 8 and 9 April 2015:
CPI inflation had fallen to zero in February and had stayed there in March. This would necessitate a further letter from the Governor to the Chancellor of the Exchequer which would be published alongside the May Inflation Report. Inflation was likely to turn slightly negative briefly at some point in the coming months and to remain low for the rest of the year, probably requiring further letters over that period. The path of inflation thereafter would depend on the way in which wages and prices responded to developments in the real economy.
Although there had been some stabilisation in indicators of inflation expectations and most long-term measures were judged to be broadly consistent with the 2% target, there was still a risk of weak price pressures persisting for longer than would be consistent with bringing inflation back to target within two years. Wages remained relatively weak, both in the United Kingdom and to a certain extent internationally, although it was unclear if the moderation in AWE growth in the three months to January would continue. A further pickup in wage inflation would be necessary for labour cost growth to be consistent with meeting the target in the medium term. Set against that, it was possible that the appreciation of sterling was feeding through more quickly into the CPI than expected. That could mean less downward pressure on prices to come and a faster pickup in inflation when the effects of recent falls in energy and food prices dropped out of the annual comparison.
Against this backdrop, all Committee members agreed that it was appropriate to leave the stance of monetary policy unchanged at this meeting, although two members regarded this month’s decision as finely balanced. There was a range of views over the most likely future path of Bank Rate, but all members agreed that it was more likely than not that Bank Rate would rise over the three-year forecast period.