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

Saturday, August 8th 2015 - 08:22 UTC
Full article 6 comments
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 said a collapsing stock market in China and continuing talks over Greece's debts mean the outlook for global growth was muted.
Timing for a Bank rate increase is “drawing closer”, Governor Carney said in a news conference, but cannot “be predicted in advance”. Timing for a Bank rate increase is “drawing closer”, Governor Carney said in a news conference, but cannot “be predicted in advance”.
Inflation is below the 2% target; drop in oil prices and energy costs in general, as well as a rise in the value of sterling, which has risen 3.5% since May. Inflation is below the 2% target; drop in oil prices and energy costs in general, as well as a rise in the value of sterling, which has risen 3.5% since May.

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.

Categories: Economy, Politics, International.

Top Comments

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  • DanyBerger

    Well stagnation seems to be the key word here like happen in Japan since the '90...

    Meanwhile in real Britain pensioners have to plan a head if they will buy food or turn the heating on next winter...

    Sad, really sad...

    Once UK the lion of the seas with the most powerfull fleet the world ever known and a world economic power, now reduced to a little hungry lap dog of UZAMEX...

    How deep to the bottom of the barrel a nazion can fall???

    Well seem very deep

    Aug 08th, 2015 - 12:09 pm 0
  • ChrisR

    @ 1

    What a shame that the present Dany B is not the one with a brain: I do wish he would come back I could at least get some sense out of him on technical matters.

    This one is showing his Nazi heritage with 'nazion'.

    Plus the post itself is utter crap.

    Aug 08th, 2015 - 08:15 pm 0
  • PDG0192

    @1: Danny-boy, that 0.5% is great for borrowers from the banks. Inflation below 2%? And that's bad? If you actually read the whole article, instead of the headline, you'd understand that inflation is currently well below 2%, in fact it's about 0.5% at the moment in the UK. If that's bad, what do you have to say about 30% below the poverty line, 38% inflation and negative GDP?

    Aug 08th, 2015 - 09:13 pm 0
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