Last week, the European Central Bank took steps to boost the eurozone economy, cutting its overnight deposit rate and extending its €60bn stimulus programme by six months.
Advertisement
“With inflation running at close to zero and concerns a slowing China may impact the health of the global economy, rate rises in 2016 are far from a certainty”.
This month’s meeting of the Bank’s nine-strong Monetary Policy Committee (MPC) comes at a time when the economy still faces some challenges.
The minutes said it “might now be feeding more materially into pay negotiations”, with employers potentially reluctant to award pay rises that did not reflect the inflation environment – pegged down by falling oil costs and the effects of the supermarket price war.
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.
Just 35 percent of Britons polled in the days after it released a relatively dovish set of economic forecasts last month expected a rate rise in the next 12 months, down from a four-year high of 50 percent in August.
The pound’s initial decline after the meeting’s minutes were published Thursday was short-lived, and Britain’s currency swung between gains and losses versus the USA dollar for much of the afternoon. He said the risks to domestic cost growth to the upside, and were sufficient to justify an immediate increase in Bank rate.
Janet Yellen, who chairs the Fed, told a Congressional hearing last week, “When we put it all together we’re still seeing an overall picture of slightly above trend growth, ongoing improvements in the labour market”.
“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”, the British Chambers of Commerce’s chief economist, David Kern, said.
Coupled with inflation, low interest rates have destroyed any hope of bagging a return on cash. “The actual path Bank Rate will follow over the next few years will depend on the economic circumstance”, the BoE added. If the BoE waits too long to raise rates, inflation may be above target once the temporary factors begin to fade out of headline inflation.
Advertisement
The rate decision was in line with market expectations as experts predicted the rate freeze on the back of modest recovery in private consumption and the expected rate hike in the United States.
