LONDON, Sept. 18 (Xinhua) -- Economists said Wednesday that the latest minutes for the Bank of England (BOE) Monetary Policy Committee (MPC), which sets the bank rate, showed the BOE was becoming increasingly optimistic about UK growth prospects.
The BOE minutes for September's MPC decision show a 9-0 vote for keeping the bank rate at 0.5 percent, and a 9-0 vote for not extending the Quantitative Easing policy (QE) beyond its current 375-billion-pound (about 599 billion U.S. dollars) size.
James Knightley, senior UK economist with ING, told Xinhua on Wednesday, "They are signalling that they are a little bit more upbeat on UK growth prospects, suggesting that recovery is taking hold and that there are some upside risks to their forecasts."
Knightley added, "They are still concerned about some risks such as emerging markets and the strength of sterling and the rise in market interest rate but it still suggests to us the growing probability that interest rates in the UK will be raised far earlier than the BOE is suggesting. We think the early part of 2015, while the BOE is suggesting 2016."
The minutes showed that no MPC member spoke in favor of extending QE, the first time this has been the case for several months.
This reflects a recent run strong data in the UK, said economist Simon Wells at HSBC Global, and that developments in the eurozone, the UK's largest export market, also hinted at a faster recovery.
The lack of advocates on the MPC for extended QE marked a change in tone from dovish members.
Wells said, "In July some members thought further stimulus was warranted and that the case for easing remained as compelling in August. These members did not vote for an easing of policy in these meetings, however, preferring to wait and gauge the impact of 'forward guidance'."
Simon Hayes, chief UK economist at Barclays Economics Research, said the minutes showed the BOE had recognized the growing strength of the recovery, "In response to firmer business surveys, Bank staff had judged that Q3 GDP growth was more likely to be in the region of 0.7 percent quarter on quarter than the 0.5 percent in the August Inflation Report."
Hayes said the MPC was not convinced that growth would bring about inflationary.
He said, "They thought it was too early to assess whether stronger activity would have any additional inflationary impetus, and its baseline case remained that the economy's effective supply capacity would rise alongside demand. Also, the committee noted that the recent appreciation in sterling would push down on inflationary pressures."
Recent growth in the housing market has sparked media stories about a housing bubble being created, which could first inflate and then deflate the economy if it burst.
Government policy to encourage house buyers to spend their money, and to businesses and banks to invest through the Funding For Lending Scheme have also been interpreted by some as inflationary pressures.
Hayes said, "If concerns do arise surrounding the pick-up in housing market activity, and the BOE's line so far has been that the improvement has been from a very low base and so is not obviously a cause for concern, it will be for the Bank's Financial Policy Committee to address them in the first instance." (1 pound = 1.59 U.S. dollars)