Muted oil prices, wage growth holding United Kingdom inflation at bay

Regarding the latest decision on interest rates, senior economist at Julius Baer David Meier said: “At yesterday’s December meeting the BoE’s Monetary Policy Committee (MPC) was not in the mood to rattle markets out of their comfort zone before the holiday season”.

Britons’ expectations about inflation remain nearly unchanged compared to previous months, despite consumer price falling below zero in September and remaining at -0.1 per cent in October.

When the Bank first made that short-term inflation forecast last month, it prompted investors to push back into late 2016 and 2017 their expectations of when the BoE was likely to finally start raising rates.

United Kingdom growth is healthy – and with the prospect of a Federal Reserve rate hike next week, many see the Bank of England gearing up to tighten itself.

BoE Governor Mark Carney has previously said that the decision on when to raise rates was likely to come into “sharper relief” around the turn of the year.

Mr Cox added: “The market is now expecting a hike in the middle of next year, but this wouldn’t be the first time savers have seen their hopes of higher interest rates dashed”. He also believed starting now to get interest rates back towards more normal levels would mean that future increases in borrowing costs could be more gradual.

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 outlook for the domestic economy was little changed from the forecasts contained in the Bank’s November Inflation Report, with “robust growth in private domestic spending continuing to counter-balance subdued demand growth overseas”.

The Bank also noted that nominal pay growth, the amount workers are paid in cash not adjusted for inflation, had flattened recently. “Near term, upside targets in GBP-USD could be the 50- and 200- day moving averages at 1.5238 and 1.5318, respectively”, says Dominic Bunning, Strategist at HSBC Bank plc. The Committee voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion.

The dinar strengthened 0.2 percent to 122.14 against the euro at 12:05 p.m.in Belgrade, according to data compiled by Bloomberg.

Sales in department stores expanded 17.4 percent in November from a year earlier, and gasoline and diesel sales grew 5.4 percent last month. The actual path Bank Rate will follow over the next few years will depend on the economic circumstance.