As expected, the bank made a decision to hold off on adding to the £375 billion ($569 billion) of asset purchases it has unleashed over previous years and kept its main benchmark rate at a record low of 0.5 percent.
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The Monetary Policy Committee voted 8-1 on Thursday to keep rates steady.
Looking into the meeting minutes, the MPC said that Core inflation remains subdued, and CPI inflation is expected to stay below 1% until the second half of next year. The bank last changed rates in March 2009.
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, while monetary policy in the U.S. and Europe is moving in completely opposite directions.
The U.S. Federal Reserve is expected to raise interest rates next week, while the European Central Bank cut a key rate earlier this month. She is ready to raise rates at the Fed’s policy meeting this month as the domestic economy is improving, which is also affirmed by the latest job data.
Nick Dixon, investment director at Edinburgh-based life and pensions group Aegon UK, said: “Although MPC members who voted to hold rates had one eye on the US Fed’s decision next week, the MPC’s forward guidance indicate that rates will remain low for “some time”.
Having weakened further earlier in the day, the pound gained 0.4 percent on Friday to $1.5230 as the greenback fell across the board, its highest since November 20.
If you have refinanced your student loans with one of the new players (like SoFi, Earnest, or Commonbond), to a variable rate loan, also expect these loans to see interest rate increases.
Most of the committee said there was a downside risk to the Bank’s inflation forecast, which predicts inflation will slightly exceed the two per cent target in two years if Bank rate follows the path implied by market expectations.
Regardless of any potential rate rises in the USA there appears to be little current inflationary pressure that may necessitate a rate rise in the United Kingdom for quite some time as we are well below the target figure of 2% and our major trading partners in Europe are still suffering from economic stagnation.
British consumers are spending, but by not quite as much – shopping down 0.4 per cent on a like-for-like basis in November.
The Bank of Korea has predicted GDP growth of 2.7 per cent for the whole of 2015.
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“Raising rates this year will, in my view, serve to reduce monetary policy uncertainty and to keep the economy on track for sustained growth with price stability”, Mr Harker was reported as saying.
