The bank said the short-term inflation outlook has improved since the November forecast and a stronger krona and more favorable global price developments provided the scope to lift interest rates more slowly than was previously considered necessary.
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It might also be a reflection of employers offering lower wage deals because of low inflation, something the Bank has said previously said could hurt Britain’s recovery.
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.
This month’s rates decision comes as the economy still faces some challenges, with the minutes of the MPC meeting showing recent economic indicators suggested little pick-up in gross domestic product in the fourth quarter.
But the minutes also show that if oil prices, which touched below 40 U.S. dollars a barrel earlier this week for the first time in almost seven years, see another sustained decline, its inflation forecasts could be trimmed once again. There is “no mechanical link” between United Kingdom rates and those elsewhere, the Bank said.
The outlook for inflation reflects the balance between persistent drags from factors such as sterling and world export prices and prospective further increases in domestic cost growth.
US Federal Reserve Chairwoman, Janet Yellen stated last week that Fed interest rate increases will come slowly in the months ahead amid tepid growth overseas and divergent monetary policies between the US and other nations. Despite lower unemployment, nominal pay growth appears to have flattened off recently, the bank noted.
MPC member Ian McCafferty has been the lone policymaker calling for a rise since August and is unlikely to be joined by fellow rate-setters this month.
“The Mpercent’s decision to leave interest rates on hold again on Thursday highlights how the United Kingdom is set to tread the middle path between a loosening European Central Bank and tightening US Fed”, said Capital Economics economist Scott Bowman.
The Federal Open Market Committee will hold its last meeting of the year next week and is widely expected to raise the USA benchmark federal funds rate, which has been held near zero since late 2008. On the employment front, the number of persons employed has increased steadily, and in October the unemployment rate fell compared to that in October of a year ago while the employment-to-population ratio maintained the same level.
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Treasury 30-year bond yields dropped by five basis points, or 0.05 percentage point, to 2.96% as of 5 p.m.in NY, according to Bloomberg Bond Trader data.
