Spoiler alert: Bank of England’s hints of May rate rise are not subtle

We’ve been here before. First, the Bank of England says publicly that it thinks interest rates will need to rise. Next, a couple of members of its monetary policy committee break ranks and vote for borrowing costs to go up. Finally, the other members of the committee say they too think that the time is right for action.

This is how the Bank of England softened up the public when it raised interest rates from 0.25% to 0.5% in November, and the same pattern is being followed again. In February, Threadneedle Street used its quarterly Inflation Report to signal that borrowing costs would be going up sooner and by more than the City had previously expected.

This month, the two most hawkish members of the MPC – Ian McCafferty and Michael Saunders – said they wanted rates to go up immediately on the grounds that a failure to deal with rising inflationary pressure would risk a more severe tightening of policy later.

As a result, the markets drew the obvious conclusion: when the MPC next meets in early May it will announce an increase in interest rates to 0.75%. That would be quite a moment, because since early 2009 official borrowing costs have been set at 0.5% or lower.

So is a May move a done deal? Not quite, because the Bank has been careful to leave itself a bit of wriggle room. A rate rise will depend on the economic data that is published over the next month and a half, but judging by the minutes of the MPC’s March meeting that data would have to be quite poor for Threadneedle Street to sit tight.

One key piece of data that will come out before the May decision is the flash estimate of growth in the first quarter from the Office for National Statistics. The Bank thinks this will be just 0.3% given the 0.1 percentage points that will be lost as a result of the weather disruption at the start of March. As a result, it would take a figure of 0.2% for the Bank to have a radical rethink.

Forward-looking indicators are likely to point to a bounce-back in growth in the second quarter. The Brexit implementation deal should boost business confidence while falling inflation and rising wage growth will bolster consumer spending. It is not certain that the Bank will raise rates in May, but it will now be a big surprise if it doesn’t.