It is widely expected the nine-member rate-setting committee remained unanimous on monetary policy, but the logs from the July meeting may reveal some members' decisions became even more balanced despite incoming mixed data.
Strong growth prospects and a fast-falling jobless rate should further reinforce a more balanced decision on policy among the nine-member Monetary Policy Committee (MPC). On the other side, benign wage growth and inflation in check should offer some leeway for the central bank to keep the base rate at its record low for longer.
However, given strong growth projections and expectations of investments and wages picking up gradually, thus triggering inflationary pressures in the medium term, may prompt those more hawkish MPC members to vote for the rate hike as soon as in September, after the August Inflation report.
As for the tightening of policy, much will depend on the strength of the upcoming macro data. To paraphrase BoE Governor Mark Carney, the reaction of the MPC and the precise timing of the first rate hike will be driven by the data as they unfold.
Barclays Capital analysts expect "the July MPC minutes to be a major market mover, with growing dissent amongst the committee members. Their views on the soft earnings data will be particularly important."
On its impact on British currency, Credit Agricole CIB suggested: "The outcome of this week's BoE MPC minutes should prevent further GBP/USD gains and prompt rise in EUR/GBP. As our UK economist writes 'the overall stance of the minutes will likely be hawkish but we do not believe that some MPC members have already voted for a rate hike ahead of the August Inflation Report."
Falling unemployment vs weak wage growth
First, the UK jobless rate falling rapidly below the BoE threshold should increase pressure on policymakers to re-consider the current ultra-loose policy sooner rather than later. A fast-falling claimant count in June and business surveys showing a rapid rise in employment in the major sectors of economy indicate unemployment should continue falling faster than the central bank's latest forecast.
However, unexpectedly weak wage growth may offset those upward pressures as official data again showed earnings dropped well below the rate of inflation in May and hit the lowest level since records began in 2001. Several MPC members have already expressed concerns about benign wage rise and conditioned policy tightening upon stronger earnings.
But a significantly weak rise in salaries as presented by the official data may only be temporary, with the official statisticians saying such sharp drops in April and May were caused mainly by earlier bonus payments this year compared with the same period last year.
Also, more up-to-date figures from commercial surveys suggest pay growth has been rising sharply in recent months compared with official figures. This discrepancy was also mentioned in the June MPC minutes when policymakers said "the picture on earnings remained clouded by the stronger message given by a range of surveys."
Inflation 'well anchored'
Second, inflation remains below the official target of 2%. The Consumer Price Index (CPI) spiked suddenly to 1.9% in June and prompted the markets to perceive it as an incentive for an earlier policy tightening, but the central bank does not expect inflation to rise above the target in the medium-term. This may give it an additional leeway for keeping the base rate at a record low for longer.
But if the stronger commercial wage indicators translate into higher official data in the upcoming months, and a faster rising wage growth begins to generate upward inflationary pressures, then we may expect an earlier action on rates.
Commenting on the impact of CPI data on sterling, Barclays' economists said: "Buoyed by the recent uptick in inflation, we maintain our constructive view on GBP versus most currency pairs, with EUR/GBP being our favoured vehicle to express this view. Our technical strategists also expect further downside in the cross."
Strong growth and a looming political risk
Third, UK economic growth is estimated to have kept its momentum in the second quarter, after gross domestic product rising in the first quarter at the fastest pace out of the eight most advanced economies. Strong growth prospects are also among the most fundamental arguments for tightening policy even before the end of this year.
On the other hand, increasing political risk stemming from September's referendum on Scottish independence, the 2015 general elections, and the geopolitical crisis in Ukraine, may add more caution to the BoE's decision-making process.
According to the latest survey from the Confederation of British Industry, the proportion of firms concerned that political and economic conditions abroad may limit exports rose sharply to a five-quarter high in July.