The Bank of England is set to keep interest rates on hold. However, it also said that inflation was expected to slow considerably in the early part of 2016, falling to about 7 percent by September 2016.
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Inflation in Russian Federation was at 15.8 percent in August. It predicted that the economy would contract by 3.9-4.4 percent in 2015.
Her comments came in the light of the Bank Of England’s Monetary Policy Committee voting this morning to preserve interest rates at the present very low level.
The ruble has dropped by approximately 20% against the dollar since the beginning of July.
The interest rate decision on Thursday will be announced alongside the publication of the meeting’s minutes, as part of the Bank’s new commitment to transparency.
Like last month, Ian McCafferty was the only member of the Monetary Policy Committee, or MPC, to back an increase.
Policymakers also unanimously voted to retain quantitative easing programme at GBP 375 billion.
“The Bank wants households and firms to structure their spending and investment decisions around the fact that while interest rates cannot stay down at 0.5% for ever, they will not rise almost as quickly or as far as in past tightening cycles”. Additionally, sterling’s appreciation since mid-2013 is having a continuing impact on the prices of imported goods. These factors combined has resulted in the average of a range of measures of core inflation remaining subdued, although it picked up slightly in July to just over 1%. Some rate-setters saw a risk of inflation rising more quickly than forecast although better productivity was offsetting the effect of higher wages. While the World Bank has urged the Fed to hold off its first rate rise in nine years, some emerging market countries – which have suffered capital outflows and a strong dollar in anticipation of a rate hike – have urged the United States central bank to get on with it.
In their discussion, the officials said that any external headwinds must be “weighed against the prospects for a continued healthy domestic expansion”. “But the greater downside risks to the global environment merit close monitoring for any impact on domestic economic activity”.
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“The recent financial market volatility and fears of a more pronounced slowdown in China are an additional source of uncertainty that will likely only serve to reaffirm the wait-and-see position of most committee members”, Daniel Vernazza at UniCredit said.
