BoE Vote Unanimous, Holds Rate, Low Inflation Forces Vote Switch

The minutes showed that MPC member Ian McCafferty voted to hold rates in a U-turn on his recent calls for a rise to 0.75%.

Thailand’s central bank kept its key interest rate unchanged for the sixth straight meeting, as widely expected, allowing government spending to help revive flagging economic growth.

The five-year gilt yield slipped to 0.834 percent, its lowest level since May 2013, before recovering to 0.876 percent by the close of trading, down 2 basis points on the day. Forecasts for 2017 have also been dropped down from 2.7 per cent to 2.4 per cent.

Then, it said inflation would remain under 1 percent until the middle of this year.

The quarterly inflation report Thursday comes at a time of market volatility and plummeting oil prices. It is likely to say Britain’s near-zero inflation will inch up even more slowly this year than it forecast in its last Inflation Report just three months ago.

In the update, the Bank of England lowered its growth predictions through 2018.

In its Inflation Report, the Bank said that persistent low inflation, increases in population and therefore labour supply and changes in taxes meant that it was unlikely that incomes would increase at the rate suggested last autumn.

Asked if he stood by repeated remarks that the next rate move is likely to be up rather than down, he said: “Absolutely”.

As a result, the forecast for CPI had been “significantly revised down”, to 0.3 percent this year and 1.3 percent in 2017.

Investors will watch for any signals from Governor Mark Carney when he presents the central bank’s latest economic forecasts on Thursday.

The current pace of wage growth of 2pc is “below rates consistent with inflation being at the target”, he said in a letter to the Chancellor, George Osborne, leaving the door open for the MPC to cut rates or restart its quantitative easing programme if the committee believed lower global growth started to create a “self-reinforcing fall in inflation expectations”.

With (Other OTC: WWTH – news) global market turmoil increasing, emerging markets struggling and oil prices collapsing, central banks around the globe have pared back growth and inflation expectations, openly discussing the need for more accommodation, erasing hopes that policy normalization could start later this year.

The pound climbed to a three-week high against the dollar after a report showed United Kingdom services unexpectedly expanded in January, calling into question whether the market’s outlook for the future path of interest rates was too pessimistic. There has not been a member of the rate-setting Monetary Policy Committee (MPC) who has experienced a change in rates since Paul Fisher left in July 2014.

Mr Carney said: “As one of the most open economies in the world, the United Kingdom can not help but be affected by an unforgiving global environment and sustained financial market turbulence”.