“But also the very strong sterling which we’ve had over recent months, and that has really kept the lid on inflation, and while sterling continues to act really as a moderating force it is doing the job for the Bank of England’s monetary policy committee for it”.
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The BOE’s decision to stand pat comes as other major central banks chart increasingly divergent courses.
The wagers on the Treasury futures have implied that there is an 80% chance of the Fed announcing rate hikes on the 16th of December.
The rise in U.S. rates would be the first since 2006 and there are fears it will trigger market disruption, also coming at a time when the global economy and China’s growth have been slowing.
In the domestic financial markets, influenced mostly by expectations of a policy rate hike by the US Federal Reserve, stock prices have fallen, long-term market interest rates have risen, and the Korean won has depreciated against both the US dollar and the Japanese yen.
Investors expect the BoE to raise interest rates in the United Kingdom late next year or early 2017, according to interest-rate derivatives that track the BoE’s benchmark rate.
The Bank maintained its view from last month that inflation would not exceed one per cent until the second half of next year. 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.
The 12-month Consumer Price Index (CPI) inflation rate stood at minus 0.1 percent last month, unchanged from September.
The Bank of England policy makers said that low prices of oil and subdued growth in wages would keep a lid on the country’s inflation as they left the key rate at its record low.
“There would need to be a sustained firming in domestic cost pressures, compared with current rates” to push inflation back to the 2 per cent target, BOE officials said in the minutes.
“Governor Carney did say previously that the direction on rates would become clearer at the turn of the year”.
The dollar was up 1.6 percent against the Norwegian crown at 8.6579 crowns as Brent oil futures in London fell to near seven-year lows on OPEC’s disagreement on output cuts and the dollar’s rebound that made it more expensive to buy crude globally. Over summer it said inflation would exceed one per cent early in 2016, but moved the prediction to spring a few months later.
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“I think the US economy is healthy enough to withstand it”, said Frances Hudson, a strategist at Standard Life Investments, which oversees £ 250 billion in assets.
