Growth forecast increased by Bank of England

The BoE chose 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.

One committee member voted against the decision but the MPC voted unanimously to maintain an economic stimulus program which purchases £375 billion ($581.8 billion) in financial assets each year, the bank said in a statement. That was followed by the Bank’s quarterly inflation report.

In a sign of how the debate on the MPC may develop, some of its members saw a risk that inflation could pick up more strongly than the central forecast, the BoE said.

Those expectations are for the BOE to begin lifting its benchmark short-term rate from 0.5%, where it has been pegged since early 2009, in the first half of 2016.

On top of this the BOE will also release its Inflation Report which includes its most up to date forecasts for growth and inflation. And an intention to do so seems to be borne out, both in the inflation report and the minutes to the policy meeting, meaning the latest movements in oil prices and the currency shouldn’t be a significant impediment to lifting rates. Thereafter the path of rate rises is likely to be a slow incline, and it wouldn’t surprise me to see them stuck on 0.75% for some time.

“It will take some time for more MPC members to be persuaded higher rates are appropriate, in my view until spring next year at the earliest”.

The decision marks the 78th consecutive month of record-low interest rates.

The minutes showed the Bank’s concerns about the strength of the pound weighing on inflation, which fell back to zero in June, in the near term.

‘Ahead of time, expectations were that he would be joined by Martin Weale, and possibly (very outside chance) David Miles, ‘ said James Knightley, economist at ING.

But the Bank said a collapsing stock market in China and continuing talks over Greece’s debts mean the outlook for global growth was muted.

Matthew Ryan, strategy analyst at Ebury, said: “A Bank of England rate hike in 2015 would provide strong support for sterling back towards the 1.60 level against the US dollar, and 1.50 versus the euro by year-end”.