MercoPress. South Atlantic News Agency

Bank of England keeps rates unchanged; little talk of rise because of China and Greece

The Bank said a collapsing stock market in China and continuing talks over Greece's debts mean the outlook for global growth was muted.

UK interest rates have been held at 0.5% again by the Bank of England's Monetary Policy Committee (MPC). Members voted 8-1 to keep rates on hold - the first time for months the decision has not been unanimous, with Ian McCafferty voting for an increase.

 In its latest Inflation Report, the Bank said the outlook for inflation was “muted”, leading some economists to say a rate rise could now be delayed. However, Bank governor Mark Carney said a rise was “drawing closer”.

Many analysts had anticipated that two or three policymakers would vote for a rate increase. But the Bank said a collapsing stock market in China and continuing talks over Greece's debts mean the outlook for global growth was muted.

The Bank of England said it expected inflation to be back to its 2% target in two years' time.

Standing in the way of the Bank's desire for higher inflation is a drop in oil prices and energy costs in general, as well as a rise in the value of sterling, which the Bank estimates has risen 3.5% since May.

The timing for a Bank rate increase is “drawing closer”, Mr Carney said in a news conference, but cannot “be predicted in advance”. The decision would be determined by looking at economic data, he added, including wage growth, productivity and import figures.

The increases, when they came, would be “gradual” and limited to a level “below past averages”, he said, which is in line with his previous forecasts of how rates will change.

The Thursday decision marks the first time the Bank of England has released the monthly rate decision at the same time as the minutes of the Bank's Monetary Policy Committee meeting, without the hitherto normal fortnightly gap, and has been named by pundits as Super Thursday.

“It would have been imprudent to push through a rate rise at this moment when our economic recovery remains in need of care and encouragement,” said John Longworth, director general of the British Chambers of Commerce.

“Rates will eventually have to rise and when they do, it should be done slowly and steadily. Until that moment, the Bank of England is right to keep interest rates at current levels.”

The MPC voted unanimously to continue to hold the UK's bond-buying program at £375bn.

The pound fell sharply against other currencies as analysts put back their forecasts of when the Bank might start to raise rates.