The Bank’s Monetary Policy Committee (MPC) – which decides on interest rates – voted eight to one to keep the base rate at 0.5pc, citing concerns about a worsening global environment.
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Analysts are overwhelmingly expecting the BoE’s monetary policy committee (MPC) to hold its benchmark rate at 0.5%, the 79th month of without a change in rates.
Policymakers voted unanimously to maintain quantitative easing at GBP 375 billion.
“But there were also bullish elements to the Committee’s discussion”.
Inflation has been hovering around 0% for the past few months, but the Bank had indicated that robust domestic growth and the fading effect of last year’s big oil price falls would cause it to bounce back towards 2% next year.
Managing the return to normal monetary policy, after extraordinarily low interest rates and money printing by many central banks since the credit crisis of 2008, is the most hard task facing major central banks today.
In contrast, external MPC member Martin Weale said last month that “it seems likely to me that the bank rate will need to rise relatively soon”.
This stands against the most recent pronouncements of the Bank of England whose growth estimates may now need to be revised lower from August’s Quarterly Inflation Report levels. He described the domestic economy and labour market as strong, though he noted that “building wage pressures” were being matched by stronger productivity, which would help to keep a lid on inflation.
However, weakness will not become entrenched; rather speculators should look at betting on the pound eventually recovering.
Or at least, that is the latest view of the Centre for Economics and Business Research, The Guardian notes.
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The most honest economists admit that they simply do not know how long rates will remain on hold. Factory orders slipped by 5.2% in August – this does not include any of the VW fall-out – and this shows that the emerging market issues are already being felt in developed markets. It warns the UK’s steady economic performance “may not be sustainable if economies elsewhere continue to struggle”, lowering its growth forecast for next year to two per cent and 1.7 per cent in 2017. On the other hand, the on-going fiscal consolidation has had a restraining influence on activity and global growth has continued at below-average rates. Bank of America Merrill Lynch economists this week put off their forecast for a United Kingdom rate rise until May 2016, instead of their previous prediction of February.
