“The committee now expects less of a slowing in United Kingdom gross domestic product growth in the second half of 2016”, according to the minutes.
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However, a similar poll by Reuters suggests that the BoE is expected to maintain rates today, but signal its willingness to cut further at its next meeting in November.
The members of the MPC also agreed to carry on with its current quantitative easing (QE) programme, under which the Bank will buy up £10 billion worth of corporate bonds, and £60 billion of United Kingdom government bonds, in an attempt to get money flowing through the economy.
The MPC said these measures led to a greater than anticipated boost to United Kingdom asset prices, stating that “short and long-term market interest rates fell notably following the announcement”.
Some investors had expected the BoE to sound dovish despite the economy holding up pretty well in the aftermath of the shock Brexit vote in June.
The central bank now sees economic growth of 0.3 per cent this quarter.
“Nevertheless, since the August Inflation Report, a number of indicators of near-term economic activity have been somewhat stronger than expected”.
“It would be wrong to be considerably more optimistic in view of the good economic data following the Brexit referendum”, said Esther Reichelt, currency strategist at Commerzbank.
“The committee will assess that news, along with other forthcoming indicators, during its November forecast round”, it added.
At their latest meeting, policymakers – led by Governor Mark Carney – also said the Bank’s quantitative easing programme would remain at the same level for now.
“A 5% fall from here would take the pound close to €1.10, and we could see it fall below $1.25 as the Federal Reserve edges rates higher”.
“Bank of England governor Mark Carney acted quickly to drop the interest rate to a record low 0.25 per cent last month, promising further cuts if the United Kingdom economy worsened following the EU Referendum”, Dennis de Jong, managing director at UFX.com, said.
Earlier in the day, Kristin Forbes, an external member of the BoE’s Monetary Policy Committee, argued the pound’s sharp depreciation in the three months since Britain’s referendum on the European Union should significantly narrow the country’s deficit.
ONS statistician Mel Richard said: “The underlying pattern in the retail sector remains one of solid growth”. The MPC members noted that surveys since August had shown companies were probably cutting back on business investment, something which would weigh on the economy going forward. Carney himself effectively drew a line in the sand in August, saying: “We’re not intending to move to negative interest rates”.
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The decision raised questions among analysts over why the BoE last month cut the rate from 0.50 percent.
