Bank of England leaves key interest rate unchanged

In the end, only Ian McCafferty wanted to hike rates at the August meeting which ended on Wednesday, resulting in an 8-1 vote in favor of keeping rates at their record low of 0.5 percent, the BoE said.

Meanwhile, the UK’s bond buying programme of quantitative easing was frozen at £375bn.

But the fee those mortgage lenders charge on their cash (eg. mortgage rates) are also influenced by a whole panoply of factors, prime among them being bank funding costs – how much it costs for them to raise money themselves.

Redington co-chief executive Rob Gardner said: “Given the rock-bottom rate environment the pensions industry has endured since the financial crisis, many see a rate rise as a manna from heaven, but the reality is far more complex”.

Ben Broadbent said that the bank’s Monetary Policy Committee (MPC), which makes the decisions on interest rates, has not set a date that it would like to raise rates by. The prospect of a longer period of low interest rates tends to weaken a currency.

Oil prices have halved since last year amid a glut of supply and after starting to recover have recently been pulled back again with more crude expected to flood into the market from Iran with the lifting of sanctions after it reached agreement with the US over its nuclear programme.

It followed official data which revealed the UK’s CPI inflation fell back to zero in June.

Analysts’ consensus is for the rate to begin rising early next year amid steady British economic growth, having remained unchanged since March 2009.

The minutes were published with the bank’s latest forecast for the UK economy, which it now expects to grow by 2.8 per cent this year, compared with 2.5 per cent in May. He wanted to put rates up to 0.75 per cent. Analysts had expected him to be joined by Martin Weale, another who has voted for rate rises in the past.

Today has been dubbed “Super Thursday” in Britain as the Bank of England concluded its most recent policy meeting and simultaneously released its inflation report along with industrial and manufacturing data.

AXA Investment Managers senior economist Page says sterling has played “a significant role” in the bank’s thinking over inflation projections. Jason Simpson, a Societe Generale rate strategist, said: “The message is clear: rates need to rise”.

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.

He added that the economic recovery looked “well embedded and solid”, with the Bank expecting “steady growth over the next two years”. However, losses in the sterling were kept in check after BoE Governor Mark Carney said that although the rate hike timing could not be predicted, the time for it was indeed inching closer.