Most interest rate-setters agree. Minutes of the latest meeting of the monetary policy committee meeting show that most of them saw "few signs of inflationary pressure" and expect sterling's rise earlier this year to continue to hold inflation down. Two members voted to raise rates, but the other seven saw several reasons not to do so, among them an expected slowdown in growth later this year and the fact that the eurozone's weakness has added to the "downside risks" facing the UK economy.
The committee also pointed out that the growth in wage costs was "well below" the rate consistent with the inflation target. Figures released this week confirmed this. They show that wage inflation in the 12 months to July was just 0.7 per cent, down from 1.7 per cent in the 12 months to December. What's more, there are signs that productivity is rising so that wage rises are now being partly offset by efficiency savings; the ONS reports that total hours worked rose only 0.3 per cent in the three months ending in July, but the NIESR estimates that GDP grew by 0.5 per cent in the period, implying a small rise in productivity.
One reason for the lack of wage growth is that there is still a massive excess supply of labour. Although figures this week showed that the official measure of unemployment has fallen to 2.02 million - its lowest level since late 2008 - they also showed that there are 2.3 million people outside the labour force who would like a job, and another 1.3 million who are working part-time who would prefer a full-time job.
Chris Williamson at Markit believes there is "a long way to go" before the Bank raises rates.
