BoE keeps rates on hold

Many investors have called on the Bank to start “normalising” monetary policy to wean borrowers off super-cheap credit as the economy recovers, and to reward savers who have suffered seven years of paltry returns.

But David Kern, chief economist at the British Chambers of Commerce, pointed out: “Even though the United States may raise rates this month, the European Central Bank has eased policy even further, and global headwinds persist”. However, the BoE said there was no “mechanical” link between United Kingdom policy and those of other central banks.

In the report it also suggested that interest rates would remain at record lows for the whole of next year. It said eight of the nine-member panel voted to leave the benchmark rate at 0.5 percent this month, with Ian McCafferty maintaining his call for a 25 basis-point increase.

Indeed, the BoE argues not to over-estimate the recent rises in wage growth as inflationary driver; on the contrary, it points towards additional downside risks to the expected moderate recovery of inflation over the coming months, due to renewed lower oil prices.

The dollar was up 0.4% against the Swiss franc after the Swiss National Bank left its policy rates unchanged Thursday.

They also highlighted a leveling off in wage growth in Britain, something which is central to the Bank’s deliberations on when interest rates need to rise.

Bank of England governor Mark Carney has already said a decision to raise rates in the U.S. is “not decisive” for United Kingdom policymakers, stressing any such move on these shores will be made according to United Kingdom economic conditions. At the same time, policy makers have has tried to avoid the risk of triggering a selloff of Serbian assets by reducing borrowing costs too quickly.

Ultralow interest rates have boosted stock markets in recent years.

The wagers on the Treasury futures have implied that there is an 80% chance of the Fed announcing rate hikes on the 16th of December.

Earlier, Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor, said sentiment “remains fragile” amid growth concerns, weak commodity prices and the likelihood the Fed will next week hike rates which meant “we’re unlikely to see any significant push higher until we get beyond” that decision.

The Bank of England has voted to keep interest rates on hold once again in its December meeting – as analysts had expected. 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.

After the BoE rates announcement, London ended down 0.6 per cent, while Frankfurt boasted minuscule gain and Paris ended a smidgen softer.