It noted that the strength of the pound had dropped in response to the European Central Bank’s decision to ease this month – the easing undershot expectations – but was around the same value as in November.
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But overall, the tone of the minutes published on Thursday suggested the Bank was at least a few months away from any move to start weaning Britain off the stimulus of low rates.
The minutes of the meeting showed that continuing subdued inflation was the main focus of attention for the policy makers.
The Bank of Korea has said that even if the Fed raises interest rates, South Korea’s stockpile of foreign reserves and its huge current account surplus will shield the economy from immediate shocks.
“I was expecting a little more hawkishness given the way the BOE seemed to think that markets had maybe over-interpreted the stance in November”, said Kallum Pickering, an economist at Berenberg in London, who changed his forecast on Wednesday for the next increase in bank rate to May from February. The economist said he is comfortable with the second quarter 2016 rate hike view. “But also the very strong sterling which we’ve had over recent months, and that has really kept the lid on inflation, and while sterling continues to act really as a moderating force it is doing the job for the Bank of England’s monetary policy committee for it”.
Sterling gained against the euro and traded at its highest in nearly three weeks against the dollar on Thursday ahead of a Bank of England statement that some are looking to for a more bullish tone on the timeline for interest rate hikes.
Median predictions for core PCE inflation, which the Fed watches closely, haven’t fluctuated much in half a year of monthly Reuters polls, now in a 1.5-1.7 percent range for 2016. The 10-year gilt yield fell one basis point, or 0.01 percentage point, to 1.87 per cent, after sliding to 1.82 per cent. The 2 per cent security due in September 2025 rose 0.09, or 90 pence per £1000 face amount, to 101.19.
Previously the Bank had sought to force the pound exchange rate complex lower, and push back interest rate expectations, by blaming worldwide developments for remaining cautious.
The British Chambers of Commerce (BCC) warned over the UK’s reliance on consumer spending to drive growth as it downgraded its forecast for gross domestic product (GDP) growth for 2015 and the next two years.
Economists predict the panel will keep the key rate unchanged until well into next year.
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The MPC set out its most recent detailed assessment of the economic outlook in the NovemberInflation Report.
