The Monetary Policy Committee kept its main policy rate and the size of its asset purchase facility unchanged at 0.50% and £375bn, respectively, as economists had expected.
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The New York Times reported that, following the release of the jobs report, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, added his voice to the chorus of Fed officials who said it was time for the central bank to raise interest rates.
However, based off history, the fact that a rate hike is deemed as nearly certain and likelihood that the Fed will do their utmost to talk down the prospect of an aggressive rate tightening cycle, it’s anything but certain that a stronger U.S. dollar will eventuate.
But many economists said separately from the poll that the bank was likely to announce new unconventional measures to push long-term market interest rates lower as recent economic figures have pointed to risks that inflation and economic growth could be lower than the bank had projected.
The minutes of its latest monetary policy committee decision showing only one of nine members voting for a hike.
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.
Consumer price inflation rose from 0.9% the month before to 1.0% in November, due mainly to a narrowing of the scale of decline in petroleum product prices and to expansions in the extents of increase in service fees.
Officials said low oil prices and subdued wage growth would keep a lid on inflation, similar to remarks from last month.
The MPC voted unanimously to maintain its £375 billion quantitative easing programme unchanged. Economists at Morgan Stanley say British inflation could rise to 1 percent by March, much quicker than the BoE has forecast.
“The actual path Bank Rate will follow over the next few years will depend on the economic circumstance”, the BoE added.
This strongly suggests that while analysts believe the Fed will finally raise rates on December 16 after taking a pass several times this year, they are not convinced the Fed will have the proof it needs to hike rates more quickly than even the most gentle of scenarios. Japan should keep stimulating its economy until it is overheated to a point that the inflation rate is higher than desired. “United Kingdom policy may soon start to look like it’s fallen behind the curve and expectations will grow of an upward move in United Kingdom rates next year”.
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The Serbian bank has cut rates by 350 basis points so far this year to a record low 4.5 percent.
