Markets unfazed by split MPC vote

The frequently changing tone of the MPC’s communications has continued to buffet UK markets.However, the net effect of the dovish Inflation Report, the Governor’s more hawkish press commentslast weekend and the split interest rate vote revealed by the minutes of August’s meeting has been toleave market interest rates and sterling both lower on the month. Overnight index swap rates indicatethat markets expect the MPC to hold off raising rates until February 2015. This assumption lookssensible given that inflation remains on track to fall further this year, the housing market is coolingand wage growth is unlikely to pick up sharply soon. What’s more, with even those MPC membersnow voting to raise interest rates expressing their desire to tighten policy gradually, we doubt that UKasset prices are heading for sharp falls when rates finally rise.