“It would have been careless of the central bank to move on rates ahead of the Fed’s December 16 rate decision”, Ljiljana Grubic, an analyst at Raiffeisenbank in Belgrade, said before the meeting. The BoE also voted to keep the Asset Purchase Target unchanged at 375b, also as expected.
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Regarding concerns that the government’s one-time consumption-boosting measures may trigger a consumption cliff next year, Lee said the chances of this were slim, citing improvement in the average purchasing power caused by by steady wage growth and low oil prices.
Britons’ expectations about inflation remain nearly unchanged compared to previous months, despite consumer price falling below zero in September and remaining at -0.1 per cent in October.
In Britain, muted inflation and collapsing oil prices mean that there is little prospect of a hike in United Kingdom interest rates any time soon, economists say. Bank household lending has sustained a trend of increase at a level substantially exceeding that of recent years, led by mortgage loans.
They also highlighted a leveling off in wage growth in Britain, something which is central to the Bank’s deliberations on when interest rates need to rise. “Our pound outlook remains slightly bearish, due to the increased risks of seeing more rate disappointment”.
The Bank signalled in its quarterly inflation report last month that an interest rate rise in the United Kingdom may still not come for another year.
The bank of England’s rate-setters have voted 8-1 in favour of keeping interest rates at 0.5 per cent, keeping them below one per cent until the middle of 2016. It said eight of the nine-member panel voted to leave the benchmark rate at 0.5 percent this month, with Ian McCafferty maintaining his call for a 25 basis-point increase.
It’s surprising the pound weakened so much after the decision because officials barely changed their outlook, said Adam Cole, Royal Bank of Canada’s head of global foreign-exchange strategy.
The last member who had experience of changing rates was Paul Fisher, who left in July a year ago. At home, a pick-up in Britain’s dominant services industry in November pointed to a recovery in overall economic growth in the final months of 2015 after a dip in the third quarter, and could start to heat up inflation before long. Another reason for the Bank to be cautious is Britain’s planned referendum on its membership of the European Union.
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The BoE said on Thursday that Osborne’s moderated spending cuts could add 0.2 percentage points to growth next year.
