Carney hint over interest rates rise delay

The BoE decided to keep interest rates at 0.5%, with minutes of the Monetary Policy Committee meeting revealing a vote of 8-1 in favour of this decision.

But in its first-ever “data dump”, the Bank of England dispelled speculation that a near-term interest rate hike is on the cards, with inflation set to remain below the Bank’s 2.0% target for another two years.

“The falls in energy prices of the past few months will continue to bear down on inflation at least until the middle of next year”, they added.

While “some members” saw upside risks to the central bank’s inflation forecast, “most” saw Britain’s increase in inflation as more gradual than before, according to minutes of the meeting.

The two were the only MPC members to vote for a rate rise last year, before the oil price crash and the eurozone crisis sparked deflationary fears.

Bank of England Governor, Mark Carney, said during the press conference Q&A that while none of the committee pre-commits to any future rate decision, “What we do see is an economy where the slack is being used up”.

It appeared to endorse market expectations which have pencilled in the timing of an interest rate rise for next spring – unchanged from the timing indicated at the Bank’s previous inflation report, though the rise in rates after that is seen as being slightly steeper. Anyone trapped on a tracker deal needs to work out how much more they’ll need to shell out once interest rates rise and start budgeting.

Carney said inflation’s brief dip below zero was “the most striking development in the U.K.in the past year”.

Economists had predicted that McCafferty would be joined by another of the bank’s well-known hawks Martin Weale in voting for a rate rise.

Sterling fell to a three-week low Friday, on track for its biggest weekly loss against the dollar since late May, as expectations of an interest rate hike by the Bank of England were pushed back to the first quarter of 2016. The remaining eight members of the MPC voted to hold the BoE’s benchmark interest rate at 0.5%.

Barry Naisbitt, chief economist at Santander said the announcement came as no real surprise.

Stock market turmoil in China and Greece’s debt problems cast only a small shadow on the global outlook, the BoE said.