BOE Holds Rate on First Super Thursday

“In light of the reduction in oil prices and the appreciation of sterling over the past three months, it appeared that the increase in inflation over the following year would be more gradual”, the BOE said in the minutes.

Ian McCafferty became the first MPC member to break from the rest of the pack for the first time this year by voting to raise rates by 25 basis points, saying he believed the risks to inflation rising – due to increased consumer spending and confidence – were strong enough to act now.

But it looks like it is going to be a big surprise when the central bank finally increases interest rates as the BoE’s deputy governor Ben Broadbent just revealed that it will not pre-announce a date for a rise.

“Mr Carney’s signal will help prepare the business community for what will be the first interest rate rise since July 2007″. Up until now the minutes were released two weeks after the meeting.

The Bank raised its forecasts for Britain’s economic growth this year to 2.8% from 2.5% and kept its growth projections for the following years largely unchanged. Rates are then on course to hit 1 per cent at the end of 2016 and 1.5 per cent at the end of 2017, according to expectations.

‘This is understandable and is another welcome sign of the economy returning to normal.

Carney said that the time for an interest rate rise was “drawing closer”, but that it could not “be predicted in advance”.

However, the euro has slid about 10% against sterling in the past year and though “chunky”, yesterday’s intra-day move may not erode too much of the price gains for Irish exporters, said Philip O’Sullivan, chief economist at Investec Ireland.

He said: “The bank’s rhetoric had been increasingly hawkish of late (i.e. favouring higher interest rates)”.

The Bank of England has voted to leave its main interest rate at a record-low 0.50 percent in the face of zero inflation, it said Thursday.

Inflation will pick up a little bit more slowly because of the second slump in global oil prices recently, but should still go back to 2% in two years. “At home private domestic demand is robust and expected to remain so”.

Over the last quarter employment hasn’t risen, but wages have, which is a fairly healthy development for the labour market. “Vendors should be aware that any such increases will create resistance to overly high guide prices” he warns.

The BoE communication shake-up is all part of Governor Mark Carney’s efforts to enhance transparency and make the oft-criticised UK central bank more accountable to the British people.

“Moreover, the persistence of those headwinds, together with the legacy of the financial crisis, meant that Bank Rate was expected to remain below average historical levels for some time to come”.