South Korea’s central bank maintained its base rate at 1.50 percent, as expected, and confirmed its recent view that it is keeping a close eye on USA monetary policy, economic conditions in emerging market economies, including China, changes in capital flows and rising household debt.
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The Bank of England has kept interest rates at a half a percent, it announced Thursday in the last monetary policy decision of the 2015. Inflation was minus 0.1 per cent in inflation and is forecast by the Bank to have been slightly positive in November.
In all, the Bank of England is yet to be convinced inflationary pressures are building up at a pace that warrants an interest rate rise.
“Policymakers in the USA, however, faced with an economy growing at a similar rate to the United Kingdom, as well as a similar level of unemployment and inflation and even lower wage growth, are sending a clear message that now’s the time to start the process of normalising policy”.
Oil prices have dropped again, increasing the likelihood that inflation rates would stay subdued and nominal growth in wages leveled off during the period.
Previously the Bank had sought to force the pound exchange rate complex lower, and push back interest rate expectations, by blaming global developments for remaining cautious.
The committee voted eight to one in favour of holding rates and was unanimous in wanting to hold the current programme of quantitative easing at £375bn.
“With inflation not expected to start edging up until next year, or reach target until well into 2017, there is simply no need for the Bank to consider changing tack”. This year the BOK sees inflation averaging 0.7 percent before rising to 1.7 percent in 2016.
But the Federal Reserve in the United States is widely expected to raise rates at its policy meeting next week.
Returning inflation to target “depends on an increase in domestic cost growth sufficient to balance the drag on prices from very subdued global inflation and past increases in the value of sterling”, the minutes said.
James Knightley, economist at ING, said the minutes suggests the MPC is “in little hurry to raise rates”.
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.
As for the timing of a hike: many economists see it later next year.
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“While I believe the economy is in a position to withstand a rate hike, I can understand why the central bank may be reluctant given the number of possible risks next year”, said Craig Erlam, senior market analyst with retail currency broker Oanda.
